Health insurance for freelancers 101

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Health insurance for freelancers 101

You’ve probably heard of health insurance. You probably understand what it does, at least vaguely. Luckily for the self-employed all across the nation, some recent federal laws have made it a lot easier for freelancers to buy their own health insurance without paying an excruciating amount of money.

But what are the ins and outs of buying health insurance, especially if you’re working as a freelancer? We go through your burning questions and answer them with just the right amount of detail.

What, exactly, does health insurance do?

Health insurance helps you pay for medical and surgical expenses. Everything from injury to illness and from your annual physical to emergency surgery can be covered by health insurance.

Why would I want health insurance?

It’s mandatory! If you don’t qualify for one of the exemptions, you’ll be charged a fine, also called the "individual mandate penalty." The whole structure for how you’ll get fined is complicated (and we hope you never have to worry about getting fined in the first place), but let’s just say this: you’re better off just paying for health insurance.

There are other good reasons to get health insurance, of course: you’ll be covered if you get sick, really sick, catastrophically sick, or injured either at home or on the job. Better yet, if you have kids, you can take them to the doctor for every sniffle. (Warning: not every health insurance policy covers everything. Always read the details of a policy before you buy it.)

Most importantly, by getting health insurance, you’re lowering your risk of going bankrupt. Medical bills are the biggest cause of bankruptcies in the U.S. and behind half of all home foreclosures.

How do I buy health insurance?

Okay, so you might have heard about something called "Obamacare," or the Affordable Care Act if you’re a nerd. It was kind of a big deal: it established the whole mandate thing, Sarah Palin freaked out about death panels, and states got to sell health insurance on things called "marketplaces."

Marketplaces are one-stop-shops for all of your health insurance needs. Much like PolicyGenius’ insurance tools, marketplaces compare a variety of plans and help you pick the one that fits your needs best. You won’t be denied from any of the plans if you have a pre-existing condition. The marketplace will also show you options for Medicaid and CHIP.

Depending on where you live, there may be a state marketplace or you may be using the federal marketplace. There’s not a big difference between the two, so you’re not missing out by using one or the other (unless your state also refuses federal funds for things like Medicaid, but there’s not much you can do about that except write & call your governor, or vote someone else into office).

You can access any of the marketplaces by visiting healthcare.gov and typing in your zip code.

Cool. I can totally buy health insurance any time I want, right?

Uh, well, no. There’s this thing called open enrollment, and for most people, it’s the only time of the year that they can get a new health insurance policy. There’s a good chance you think this is annoying, but there’s a good reason behind open enrollment. Health insurance works by spreading out risk among a large pool of people (they call it a "risk pool"–get it?). If you could swap health insurance plans whenever you wanted–or, worse, only buy it when you need it and then cancel it–there would be no money coming in for health insurance companies to cover costs.

2016 open enrollment starts on November 1, 2015 and runs until January 31, 2016. If you’re reading this in the future and we haven’t updated these dates, check out healthcare.gov for updated information.

Augh! I missed open enrollment! Is there anything I can do in the meantime?

Yes! First of all, Medicaid and CHIP do not have enrollment dates. Assuming you qualify, you can apply for them at any time.

Secondly, you may qualify for a Special Enrollment Period. Special Enrollment Periods last for sixty days after certain life events, such as getting married, having a baby, adopting a baby, losing employer coverage, moving, and so on and so forth. You can go through this Special Enrollment screener to see if you qualify.

Don’t qualify for a Special Enrollment Period? There are basically two things you can do to help cover the gap until enrollment starts up: limited benefit plans and short term medical plans. Neither are available in every state and they are not long-term solutions. You can read more about these temporary healthcare solutions here.

There are so many plans. How do I choose?

It’s actually pretty simple. There are two big things you need to look at: the price and the company.

Health insurance plans are categorized into four tiers, named after various metals: platinum, gold, silver, and bronze. Platinum plans have the most favorable terms, but are the most expensive, while bronze plans are the cheapest and worst policies.

What do we mean by having favorable terms? Basically, gold and platinum plans, while costing more in premium, will cover more upfront costs by having lower deductibles, co-payments, and co-insurance.

We usually suggest that people get a silver plan–if you’re reasonably healthy, silver plans get you the best coverage for your buck.

As far as which insurance company to go with, that one is up to you. We suggest coming up with a few deal-breaker questions to help you decide. Here are some common ones:

  • If you already have a relationship with a doctor or doctors, rule out plans that your doctor(s) don’t work with.

  • If the insurance company won’t cover a must-take expensive prescription drug, rule out the plan.

  • Hate the idea of getting a referral every time you want to see a specialist? Rule out those plans, too.

  • Some insurers have really awesome websites and mobile apps for self-service, so if you hate talking to people on the phone, only choose companies who understand the internet.

Want more advice? Read our guide to choosing individual health insurance plans.

Is it going to be super expensive because I’m buying it for myself (a.k.a. not a group employer plan)?

It’s probably going to be more expensive, but not necessarily super expensive, if you catch my drift.

We recommend that you spend about 5% of your annual gross income on health insurance premiums. That’s a pretty average amount, according to the government, and it’s short of the government’s "un-affordability threshold" of 9.5%, which is another good thing. That gives you a little wiggle room for non-premium expenditures, like deductibles, co-payments, and co-insurance.

This usually ends up being a silver plan, but in some states, platinum plans are more expensive by a nominal amount, making them a perfectly good option.

What about subsidies?

If you make less than $40,000, you probably qualify for a subsidy. This tool from the Henry J. Kaiser Family Foundation will help check to see if you qualify.

Wait, I haven’t left my full-time job yet and I already have a health insurance policy through them! Can I keep it?

Maybe! There’s a program called COBRA–the Consolidated Omnibus Budget Reconciliation Act (now you can see why they just stick to COBRA)–that lets you and your family keep group health benefits provided by an employer for a limited period of time and under a certain set of circumstances.

Circumstances? you may be thinking. Yes, circumstances such as both voluntary and involuntary job loss, reduction of hours, transitioning between jobs, death, divorce, and a few other things.

If you’re interested in continuing your group health insurance policy through COBRA, you should contact your HR representative or your health insurance company directly.

A fair bit of warning: most of the time, utilizing COBRA is very expensive. If you’re leaving your job, you probably qualify for a Special Enrollment Period. Check out other policies and make sure you’re not overpaying by sticking with COBRA.

What if I never get sick? Is health insurance a waste of money?

Don’t be that person. Let’s be real: you’ll probably get sick at some point. We all do. Even if it’s just the sniffles. And health insurance doesn’t just cover the common cold: it covers preventative care, too. Have a family history of heart disease? Health insurance can make sure that you catch it early.

Last year, 33% of Americans put off medical care because of the cost. Health insurance makes it easier to get an annual physical checkup, and to get that weird bump looked at even though it’s probably nothing.

What if I stop paying my premium?

Your policy will be canceled.

What about taxes?

Okay, so imagine you’re the federal government. You have this whole "health insurance mandate" thing that you’re trying to enforce. What’s the one time every year that you can touch base with everybody and guarantee that they have health insurance?

If you used deductive reasoning to guess "my tax return," then congratulations, we have a winner.

There are a bunch of forms you could possibly need:

  • Form 1095-A: Health Insurance Marketplace Statement. You’ll get this if you bought health insurance on a marketplace.

  • Form 1095-B: Health Coverage. Your health insurance company will send this one to you.

  • Form 1095-C: Employer-Provided Health Insurance Offer and Coverage. Your employer sends this one.

  • Form 8962: Premium Tax Credit. This form tells the federal government how much of a subsidy you got (or are supposed to get) on your health insurance plan. You may get some of this tax credit before you file. You can also decide to hold it all until you file your taxes. Either way, if your reported income doesn’t match what you estimated at the beginning of the year, you may get more subsidy, less subsidy, or no subsidy at all. Read more here.

  • Form 8965. If you’re claiming to be exempt from the health insurance mandate, you’ll fill out this form.

As you can probably tell, not everyone is going to need all of these forms. Instead, you may just need one, you may need a few, or maybe you’ve super-charged your coverage and need all of them (even though you’re exempt).

In short: healthcare makes your tax return a little more complicated every year, but for most people, it should be as easy as plugging in the info from yet another form.

Okay, cool, I have health insurance. So I’m all set in the case of a medical emergency, right?

Almost! You should also consider long-term disability insurance. Long-term disability insurance can serve as income replacement in the event that you can no longer work due to an injury or medical condition. You should read more about it in our Long-term disability for Freelancers 101 guide.