Editor’s note: this is a guest post by Michael Cahill.
Many multipotentialites across the United States make their livings as self-employed individuals. Making your own hours and being your own boss are essential ingredients for that diverse independent lifestyle, well known to multipotentialites. Perhaps you’re one of them that are dreaming of making that break for self-employment. But in a world such as ours there are many variables to be considered before making such a move.
One of the important things to consider is how you intend to get your health insurance as a self-employed individual. The reality of health insurance costs in the United States sadly means that many newly self-employed workers opt to remain uninsured during their first couple of years in business. But objectively speaking that’s not a very safe choice.
So where do you start if you’re looking for affordable self-employed health insurance? Well before you get started navigating through the myriad of options out there you should know your budget, and what (if any) special coverage you’ll need for medical conditions.
On the Hunt
As with many things these days the Internet is your best friend for researching. Online health insurance brokers are a good place to start, because they give you the ability to easily compare all the different types of coverage available in your area. Or you can do it the old fashioned way and contact insurance companies directly.
Going the online route can prove time effective but is likely not to yield the most affordable options. In some cases individual health insurance policies can cost you up to four times as much as an employer sponsored health plan.
So if you’re looking for an insurance option that won’t leave your wallet feeling empty and alone, what should you do? Well let’s take a look.
Being Your Partner’s Plus One
A viable as well as exceptionally affordable choice is to be added onto your spouse or domestic partner’s health insurance plan. It’s a pretty easy thing to do and it usually doesn’t require much more than a phone call. Even though the premium will become higher for your partner with you on the plan, it will still be lower than having to buy an individual package.
The Consolidated Omnibus Budget Reconciliation Act allows those who have recently lost their jobs to purchase coverage from their ex-employer for up to 18 months for themselves as well as dependents. Sadly it is at the full price and not the usually subsidized rate one pays, as an employee. Not to mention that there’s also a 2% administrative fee on top of that. But that’s still a better choice than no coverage at all.
Turn to the Government
As of January 2014 the Affordable Care Act (ACA), in some states will increase the minimum Medicaid income eligibility to those with annual earnings at or below 133 percent of the Federal Poverty Level. For low-income earners without children there will be a guarantee of coverage without the need for a waiver in all states.
Join the Freelancers Union
As a freelancer it might be a wise move to join the freelancers union as a way to get cheaper health insurance. But there are plenty of other professional organizations that also provide less expensive routes. Other trade groups include bar associations, alumni associations, local chambers of commerce, AARP (for those over 50 years of age), and unions
Affordable Care Act
Starting next year if you are self-employed you are viewed as an individual for the purposes of health insurance. This makes you subject to the mandate required for individual insurance, meaning that if you are uninsured next year you’ll be penalized. The penalty will be $95 for the year but will increase annually at the rate of inflation.
Although no one wants to be penalized, as an individual you are also eligible for tax credits to help pay for health insurance plans sold through state health insurance marketplaces. The state marketplaces will be similar in nature to shopping at Amazon.com, except with the ability to apply some hefty tax credits towards your purchase.
For those whose incomes are between 100 percent and 400 percent of the federal poverty level, they will not be required to pay more than 9.5 percent of their income towards health insurance. That percent though is also dependent on how much you make. The more you make the more you pay, and vice versa. But the difference between your earnings and the real cost of the health insurance will be covered by the tax credit.
Medicaid will also be affected by the ACA (as I briefly mentioned earlier). The ruling last summer in the Supreme Court, although it upheld the ACA, gave states the option to opt out of the Medicaid expansion. Currently only 26 states intend to either expand Medicaid or are considering it. For those states that choose to accept the expansion, the income for eligibility goes up to 133 percent of the FPL.
For the self-employed the ACA will allow for a less expensive and more transparent way to affordably buy health insurance. But in the meantime if you are in a bind and need health insurance there are still many viable options to help get you through until January 2014.
What questions do you have about health insurance as a self-employed multipotentialite? I’ll do my best to answer them in the comments.
Michael Cahill is the Editor of the Vista Health Solutions Blog. He writes about the health care system, health insurance industry and the Affordable Care Act. For more information about the ACA may affect small business owners, visit the Vista Health Solutions self employed health insurance guide. Follow him on Twitter at @VistaHealth.