How to Get Health Insurance When You’re Self-Employed

Being your own boss is exciting! You’re in control and doing work you’re really passionate about. But what about health insurance? Most folks rely on an employer-sponsored plan for coverage. But if you’re the employer, what are your options?

Don’t worry! You’ve still got plenty. Whether you own your own business, have a steady freelance gig or are a consultant, we’ll walk you through the best ways to set up your own health insurance.

What Is Self-Employed Health Insurance?

Self-employed health insurance is simply individual health care coverage you can buy for yourself (and your family). Individual health insurance is just another term for private coverage as opposed to a group plan (like those offered by an employer).

Self-employed means you have income from a business or a freelance job but don’t have any employees. (If you do have employees, check out these tips on small-business health insurance plans.)

If I’m Self-Employed, Do I Really Need Health Insurance?

Everyone needs health insurance. Just because you’re going it alone with your business doesn’t mean you should go it alone without health insurance. (Also keep in mind, health insurance isn’t the only kind of insurance you’ll need to pick up if you’re self-employed.)

If you don’t have health insurance, you and your family could be one medical emergency away from a financial disaster. Health insurance transfers the risk of medical expenses to the insurance company—protecting you from medical bills you can’t afford. Even something as simple as a twisted knee can set you back thousands of dollars.

Listen, going through life without health insurance is not worth the risk. Make sure you’re covered.

Now let’s take a look at your self-employed health insurance options.

Health Insurance Options When Self-Employed

Federal or State Health Insurance Marketplace

The best place to start looking for a health insurance plan if you’re self-employed is the federal government’s health insurance marketplace (HealthCare.gov). The marketplace (also called the exchange) is where you can shop for private health insurance plans and enroll in them. It’s kind of a one-stop shop for finding a plan that works for you.

The marketplace began as part of the Affordable Care Act (ACA), and most states use it. But 17 states have their own marketplace website for residents. You’ll need to sign up for insurance through your state if you live in:

• California
• Colorado
• Connecticut
• District of Columbia
• Idaho
• Kentucky
• Maine
• Maryland
• Massachusetts
• Minnesota
• Nevada
• New Jersey
• New Mexico
• New York
• Pennsylvania
• Rhode Island
• Vermont
• Washington¹

At HealthCare.gov, you can find out if you qualify for lower health insurance premiums or an advance premium tax credit (APTC). An APTC is based on your income and lowers your health insurance premium. 

And if you have kids, HealthCare.gov is also where you can enroll them in the Children’s Health Insurance Program (CHIP) if you qualify.

Federal Programs

The federal government has health insurance programs for applicants who can qualify based on age, income or military service.

Medicaid

Medicaid is a federal program that provides free insurance for people with incomes below 138% of the federal poverty level. The maximum income for individuals is $20,120 and $41,400 for a family of four.² Disabilities and number of children also factor into getting approved for Medicaid.

Medicare

Medicare is government-sponsored health care for people over 65. You still have to pay a premium based on your tax history, but Medicare could be a good insurance option if you don’t have insurance available through an employer.

Military Programs

TRICARE is a federal health insurance program for active-duty service members and their families. It also covers National Guard and Reserve members, military retirees and their families, and survivors. If you’re a veteran, you also can apply for VA coverage, which can be supplemented by other types of insurance.

Short-Term Medical Plans

What do you do if you’ll only be self-employed for a little while? Let’s say you were just laid off from your full-time job, and you’re doing freelance work as you search for a full-time gig again. (And if you’re not freelancing, and you’re officially unemployed, check out these health insurance tips.)

If you aren’t planning to be self-employed for very long, you can get short-term health insurance that covers you from three months up to a year. Here are two benefits of short-term coverage:

1. You can sign up outside of the usual enrollment period.

2. Your monthly premiums will be lower than they’d be with COBRA (we’ll talk about that later).

The downside is, you’ll have high out-of-pocket costs, plus preexisting conditions (if you have any) usually aren’t covered.

Limited-Benefit Plans

Limited-benefit health insurance plans, also known as mini-med plans, offer basic medical coverage at a low price, but they only cover specific health issues—like a critical illness or accident. Steer clear of these plans because most of your health needs won’t be covered and you’ll end up paying out of pocket.

Private Health Insurance

Some insurance providers have plans customized for self-starters just like you—folks who are self-employed and need good health care coverage at an affordable rate. You’re probably looking for a plan that offers a wide range of benefits (from access to in-network providers and hospitals to annual checkups and preventative care). Start by speaking to an independent insurance agent who can help you find the best plan for the right price!

Health Care Sharing Ministries

You might have heard of something called health care sharing ministries. First, understand that these aren’t technically “health insurance.” It’s more like a group of people who belong to an organization like a church or ministry who pool their money together into a fund. They use this fund to pay for major health care costs for members in the group.

Health share plans will usually save you money on premiums, but keep in mind that they’re not regulated by the Affordable Care Act, which means they’re not required to cover your preexisting conditions. If you’re pretty healthy, a health share plan could be a good option for you.

Membership Organizations

You’ve lucked out and found a freelancers union or other membership organization that offers discounted health insurance. Nice! These industry-specific health insurance plans are available for certain groups (from caregivers to college alumni). But with these plans, read the fine print before signing that dotted line. You don’t want to pay more for a plan that gives you less coverage compared to a marketplace plan you could just buy on your own.

Direct Enrollment or Private Exchanges

You can buy a plan directly from an insurance company through a private online exchange and bypass the federal or state insurance public marketplace. Sometimes these exchages are called direct enrollment sites. But they’re not always the best because they don’t have as many plans and companies to choose from as federal or state exchanges do. You also might feel like you’re being pushed to buy a particular plan, and plans don’t have to follow ACA rules.

COBRA

If you recently lost your job, you can keep your previous employer’s health insurance plan with COBRA health insurance. COBRA stands for Consolidated Omnibus Budget Reconciliation Act. (That’s a mouthful!) COBRA lets you keep the same employer-based health plan you had at your old job (for up to 36 months but usually around 18 months).³ But keep in mind, you’ll pay more each month because your employer won’t be pitching in on the premium anymore.

How Much Does Health Insurance Cost if You’re Self-Employed?

You want good coverage—but you also don’t want to pay an arm and a leg for it. Let’s take a quick look at how much you can expect to pay for health insurance if you’re self-employed.

A ton of factors go into the cost of health insurance: who you need to cover (like a spouse or kids), the level of coverage you need, whether you smoke, your age, and where you live. A marketplace plan also offers financial help based on your income and family size. Here are some average plan costs (without discounts):

The lower your income and the more kids you have, the more financial help you’ll get. Check out HealthCare.gov to see if you qualify for help.

The ACA also limits insurance premiums to a percentage of your income. At poverty levels, a single person with no kids pays 0%, but the percentage goes up to 8.5% when your income is more than $54,360.⁵

Self-Employed Health Insurance Tips

Okay, as someone who’s self-employed, you’re also doubling up as your own human resources director. There’s no one to call with questions about your benefits. But there’s no need to panic! We’ve got a few pointers if you’re shopping for self-employed health insurance.

1. Consider agencies that could help.

It’s easy to feel alone and out of the loop when you’re self-employed. You don’t have that feeling of security that comes with working for a large business. That’s why it’s a good idea to connect with organizations that offer something similar—like the National Association for the Self-Employed. Membership could give you access to discounted health insurance plans, Health Savings Accounts (HSAs), and other support.   

2. Use the self-employed health insurance tax deduction.

We’re talking about money, folks! Being your own boss also means dealing with times when business is slow. That’s why it’s important to know how to make your money work harder when you’re buying health insurance. You can do that with the self-employed health insurance income tax deduction. It’s just one of the many self-employed tax deductions you can use.

If you qualify for this deduction, it means you’re allowed to deduct 100% of your health insurance premiums from your adjusted gross income when you file your income taxes every year.⁶ But keep in mind, this is a self-employed health insurance deduction for individuals and their dependents—not for small businesses.

Here are a couple of things you need to do to qualify:

• Show no other forms of health insurance coverage. You’ll need to prove you have your own personal health insurance coverage and aren’t covered by an employer’s group plan or named in someone else’s policy—like your spouse’s policy. You also can’t claim the deduction if you qualify for coverage from your spouse’s group plan but choose not to use it.  
• Prove your income from being self-employed. You need to have some income coming in to apply for a deduction. And if you have a few different streams of self-employed income, you can only claim the deduction against one of those streams. The one with the highest income is probably your best bet!

And if you’re pulling your hair out trying to figure out how to file taxes as someone who’s self-employed, don’t sweat it. Check out these tips on how to file freelance taxes, along with the ins and outs of filing quarterly taxes.

3. Find a high-deductible health plan.

If your health insurance plan has a high deductible, that means lower monthly premiums. And we like that because it reduces your monthly expenses. You just need to make sure you can foot the higher deductible when you need to. And that’s where the HSA comes in. An HSA is a tax-advantaged savings account linked to a high-deductible health plan (HDHP). The money you save in your HSA can be used to pay for qualifying medical expenses tax-free. You can also get a break on your income taxes for putting money into your HSA.

4. Get expert advice from an independent insurance agent.

When you’re in charge of finding health insurance, don’t leave it to chance or the internet to find the best plan for you.

An independent insurance agent—like the ones you’ll find through our friends at Health Trust Financial—are the experts to turn to.  

You can find agents who are ready to walk you through your health care options and track down the best health insurance quotes in the exciting world of being your own boss. And since Health Trust Financial is RamseyTrusted, you know you’ll be working with top insurance agents who really know their stuff.