Five Health Insurance Options if You Are Self-employed

Several years ago I left the stability of a 9-5 job to escape the constant ridicule of my micro-managerial CEO, and instead waitressed for a few years. As a result, I left behind the security and comforts that salaried positions provide, such as paid vacations, sick time, and the pinnacle of benefits: paid health insurance. After a few months of waitressing, I gained many of these benefits back, but when I started blogging as a self-employed freelancer, I felt these same pains again. Though being self-employed is a much better gig than waitressing (there really is no comparison), there is also no paid time off, no company-matched 401k, and no health insurance paid by my employer (since, of course, I don’t technically have one). Many salaried employees don’t realize how critical their health insurance benefits are until they lose them. If you recently began to work for yourself, you’re likely looking for a health insurance plan to help reduce medical costs, whether you have routine needs for medication or just in the case of a catastrophe. Here are five health insurance options you may want to consider if you are self employed.

COBRA

If you recently left a job to work for yourself, and were covered by an insurance plan offered by that employer, you may be eligible to continue your health insurance coverage through your previous employer for up to 18 months. Your previous employer must have employed more than 20 people. (If your previous employer employed less than 20, they can still offer you this option, though they are not mandated to offer the benefits for any specific length of time.) If you are eligible for COBRA, you must be offered this option under COBRA, which was an act of legislation passed in 1986. However, if the company paid your monthly health insurance premium for you, you may have to pay your own premium out of pocket to continue receiving the benefits of the plan. This cost will be notably lower than any individual private plan you can find, and the benefits will usually be much better as well.

Compare Comprehensive Individual Insurance Plans

Five Health Insurance Options if You Are Self EmployedIf COBRA is not an option — or you are running out of time to continue your COBRA benefits — you may want to consider shopping around for comprehensive individual insurance. (One of the best sites that can help you compare plans is eHealthInsurance.) These insurance plans are offered by private insurance carriers and can cost anywhere between $200-$500 for a single individual per month. A comprehensive plan typically provides pharmacy benefits to reduce the cost of prescribed medications, cover the cost of preventive health maintenance (such as annual exams and a few doctor visit per year in case you get sick), and reduce the cost of any major injuries or illnesses. The co-payments and deductibles on these plans are usually high, and many generic medications are now available at pharmacies for a low price even without insurance. Additionally, you can be denied on these plans for certain pre-existing conditions in some states. (If this is the case, you may want to look up information about your state’s high-risk insurance pool.) Before choosing this option, however, take a very close look at the benefits and weigh them against the cost. If you or your family doesn’t need routine medical care or prescription coverage, you may not need this type of plan, and instead may want to consider a catastrophic plan instead.

Catastrophic Health Insurance Plans (or a Health Savings Account)

For some people, health insurance plans are more akin to car insurance; they cover minor scrapes and scratches, but are designed to help reduce financial liability in the event of disaster. Some private health insurance companies also offer plans that cost much less than comprehensive plans, but only offer coverage in the event you end up in the ER or hospitalized. They also typically do not cover pharmacy benefits. For those who do not take medication on a daily basis and do not need routine therapy or other medical care, this may be a better option than paying 300-500 per person in your household for comprehensive coverage. If you find that you and/or your family only get sick once or twice per year, the cost of paying your doctor per visit in tandem with this type of plan may be much lower than the cost of a comprehensive plan.

Call Your Parents

Are you under 26? If your parents have health insurance coverage, you may be eligible for automatic coverage by their health insurance plan until your 26th birthday. Previously, many children were kicked off their parents’ plan as soon as their 18th birthday, with exceptions for those continuing their education. If you’re a young freelancer, consider asking your parents about this option. While they may not necessarily agree with your lifestyle, this option is your most cost-effective and will likely come with the best benefits.

Join An Association-Endorsed Health Insurance Plan

If you are self-employed and work in a specific industry, you may be able to join a plan similar to those offered to individuals to work in a specific industry. Mediabistro offers one such plan for freelancers, and the National Association of the Self Employed and the Freelancers Union are also good places to look if you’re interested in joining a group plan while self-employed.

Are you self-employed or a freelancer? How do you manage your health insurance? Feel free to share your thoughts and ideas in the comments.

Doctor office image via Subconsci Productions

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  • http://twitter.com/keridwyn Keridwyn Deller

    I like ehealthinsurance – you can compare different plans and pick the one that’s right for you – plus they have great customer service to answer your questions. I don’t work for them, though I know it sounds like it! Just had a great personal experience.

  • Joey Giangola

    Very solid article. As a licensed health insurance agent it is refreshing to read an unbiased, informative and properly researched article on health insurance.

    The only thing you want to be careful about is saying that Health Savings Account plans “typically do not cover pharmacy benefits.” I know plans differ from state to state but all HSA’s in Ohio “cover” prescription medication, they just do not provide co-payments for said medication. When something is not covered on a health insurance plan, that means the cost of the procedure or item does not apply towards your deductible. If it is covered that dollar amount is applied to your calendar year deductible. 

    In addition to that, having health insurance will gain you access to that company’s discounted rate. This is the rate in-network doctors, hospitals and pharmacy’s have agree to provide service for. This discount can rage from 30-70 percent depending on the service. Which could turn a $100 doctors office visit into only $45 or $50 dollars.

    Finally, when electing COBRA the employee will be responsible for paying 100 percent of the cost to keep that plan. Unless that individual has several pre-exisiting or uninsurable conditions, they will probably be able to find an individual plan for less money.

  • TechMali

    Well, I’m a teen, and I live in Canada. But I quite possibly will have to worry about this stuff in the near future because after high school (I graduate next year just before summer if all my grades are up to par, I study as hard as I can!), I’m going to move to Michigan and go to Ferris State University, so I’ll probably have to worry about health insurance then. But I’ll bookmark this so I can come back to it when I need it, you’ve got some great ideas!

  • http://twitter.com/tsilb Kevin Connolly

    I shouldn’t have to go without health insurance, but I SHOULD be allowed to choose to. Ron Paul 2012.