Updated: November 22, 2024
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To get health insurance as a self-employed individual, start by determining your and your family’s health needs. Next is to pick from different options like the Health Insurance Marketplace for plans with possible tax credits, check eligibility for Medicaid or Medicare or consider private insurance for customizable plans and year-round enrollment.
Some professional organizations provide group plans for self-employed members. Consider the benefits of each to select the appropriate option.
Self-employed individuals have diverse options for health coverage, each with unique features and benefits. These range from individual plans offered by private providers to government-sponsored programs, accommodating different financial and medical needs. Some of the best health insurance options for self-employed people include:
The Health Insurance Marketplace, established by the Affordable Care Act (ACA) in 2010, serves as a centralized platform for purchasing non-employer-sponsored insurance (non-ESI). These exchanges allow for easy comparison of plans based on coverage, network type and costs. While HealthCare.gov serves as the default for most states, some have their own platforms.
Benefits of ACA exchanges for self-employed individuals include:
Comprehensive Coverage
All ACA plans are "qualified health plans" (QHPs), which are mandated to cover essential health benefits, including mental health services, prescription medications and lab services, without denying coverage for pre-existing conditions.
Premium Tax Credits
These credits reduce monthly plan premiums, based on income and family size. People with incomes between 100% and 400% of the Federal Poverty Level are usually eligible for these credits.
Open Enrollment
Enrollment in these marketplaces is typically annual, but special enrollment periods are available for qualifying life events like marriage.
Professional groups and associations such as AARP Health, Small Business Service Bureau, Writers Guild of America and Freelancers Union often provide their members with access to group health insurance plans. These plans are typically negotiated by the organization, potentially offering more favorable terms or rates compared with individual market plans.
Advantages of such plans for freelancers and self-employed business owners are:
Cost Savings
Due to the collective bargaining power of a group, premiums can be more affordable compared to individual health insurance plans.
Expanded Coverage
Might gain access to a broader network of health care providers and possibly more comprehensive coverage options.
Note that tax advantages may differ from those available in individual health plans.
If a self-employed person’s spouse or domestic partner has access to an employer-sponsored health plan, they can often be added to this plan. But they must check with their employer because it depends on policy terms. Also consider tax implications as unlike employer contributions to employee-only coverage, which are generally tax-free, contributions for a spouse or domestic partner might be taxable.
This option has its own benefits:
Reduced Costs
Employer-sponsored plans often subsidize a portion of the premium costs, making them more affordable than some individual plans.
More Coverage
These plans typically offer a wide range of coverage options, including various health, dental and vision benefits.
Available directly from insurance companies or through licensed agents and brokers, these plans provide a flexible and customizable health coverage option for self-employed individuals. Enrollment can be usually done at any time of the year, offering a key advantage over fixed enrollment periods.
Private health insurance has a wider variety of plans for tailored coverage over health insurance exchanges, access to an extensive network of health care providers and competitive pricing. This flexibility ensures that self-employed individuals can find a plan that suits their specific health needs and budget.
Government programs, specifically Medicaid and Medicare, provide low- to no-cost health care options for eligible self-employed individuals, based on criteria like income, age or disability, eliminating the need for tax credits to lower premiums. However, they may offer fewer plan choices compared to the vast options available through ACA Marketplace plans.
Medicaid offers low-cost or free health coverage to those with limited income and resources. This coverage varies by state, especially with many states having expanded Medicaid under the Affordable Care Act, allowing a higher income threshold for eligibility. Medicaid generally covers a wide range of services, such as doctor visits and hospital expenses, often with minimal out-of-pocket costs.
Medicare primarily serves those over 65 and younger individuals with certain disabilities. It is divided into four parts:
This part covers hospitalization, skilled nursing facility care, hospice and some home health services. For most individuals who have contributed to Medicare taxes while employed, there's no premium for Part A.
Provides for doctor's visits, outpatient care, medical supplies and preventive services. Part B involves a variable monthly premium based on the individual's income.
Medicare Advantage Plans, offered by private companies certified by Medicare, combine the benefits of Parts A and B, often with added services like dental, vision and hearing care.
Medicare Part D extends prescription drug coverage to Original Medicare. It also integrates with certain Medicare Cost Plans, selected Private-Fee-for-Service Plans and Medicare Medical Savings Account Plans.
Short-term health insurance plans are a practical choice for self-employed individuals seeking immediate, temporary health coverage. These plans are ideal for bridging gaps in insurance, such as during job transitions or waiting periods for more permanent insurance solutions.
The duration of these plans is variable, typically ranging from a few months to a year, with some offering extensions. They are less comprehensive, often excluding pre-existing conditions, and usually do not cover all essential health benefits. This results in higher out-of-pocket costs for certain medical services. Premiums for short-term plans are generally lower, but the limited coverage is a significant trade-off.
Short-term health insurance plans are a practical choice for self-employed individuals seeking immediate, temporary health coverage. These plans are ideal for bridging gaps in insurance, such as during job transitions or waiting periods for more permanent insurance solutions.
The duration of these plans is variable, typically ranging from a few months to a year, with some offering extensions. They are less comprehensive, often excluding pre-existing conditions, and usually do not cover all essential health benefits. This results in higher out-of-pocket costs for certain medical services.
While premiums for short-term plans are generally lower, the limited coverage is a significant trade-off.
Short-term Health Insurance Plans are often less regulated as they do not have to comply with Affordable Care Act (ACA) standards. This results in these plans often excluding pre-existing conditions and not covering essential health benefits like maternity care and mental health services. They may also impose annual or lifetime coverage limits, unlike ACA-compliant plans. Please read the policy terms carefully if you choose to go this route.
Limited benefit plans offer self-employed individuals lower-cost, specific coverage options. These plans do not cover all essential health benefits and are often used to supplement high-deductible or minimal coverage plans. The premiums for these plans are generally lower, reflecting the reduced scope of coverage.
They usually include critical illness or accident plans, covering predetermined health issues, and indemnity plans with greater cost-sharing.
Importantly, limited benefits plans are not a substitute for full health insurance. They are best suited for individuals in good health who need minimal coverage and are looking to reduce medical costs for routine care.
COBRA, or the Consolidated Omnibus Budget Reconciliation Act, allows self-employed individuals and their families to retain their employer-sponsored group health insurance for up to 18 months after leaving a job or experiencing specific qualifying events like divorce or the death of the covered employee. However, as a self-employed individual, you will be solely responsible for covering the entire premium, which was previously shared with your employer. Additionally, a 2% administrative fee is tacked on.
Health Care Sharing Ministries (HCSMs) are faith-based programs that involve a community of members who share medical expenses according to their religious beliefs and communal guidelines. HCSMs are not insurance companies, instead, they facilitate the sharing of health care costs among members. Members typically make monthly "share" payments that are used to pay for other members' medical expenses.
Notably, HCSMs are not bound by the regulations that govern traditional health insurance. As such, they may not cover pre-existing conditions, certain medical procedures or preventive care to the extent that conventional insurance plans do.
Self-employed individuals are those who operate their own businesses or provide services independently. This broad category includes, but is not limited to:
While a business owner can be self-employed, not all self-employed individuals own a business in the traditional sense. For instance, a freelancer working with multiple clients or an independent contractor serving a single client is considered self-employed, owing to their autonomous way of earning income.
This status requires them to arrange their own health insurance and makes them eligible to deduct premiums from taxable income.
When selecting health insurance as a self-employed individual, several vital factors come into play. Consider your personal health needs, financial constraints, family plans, preferred providers and additional benefits to make an informed decision.
Personal Health Care Needs
Assess your age, pre-existing conditions and upcoming medical expenses to find a plan that suits your specific health requirements.
Family Considerations
If you plan to start or expand your family, ensure the plan includes maternity and pediatric coverage or access to necessary specialists.
Budget
Determine how much you can comfortably allocate to health insurance premiums and out-of-pocket costs like deductibles, while maintaining your financial stability. A lower deductible typically leads to higher monthly premiums.
Provider Network
Verify that your preferred doctors, hospitals and health care facilities are within the plan's network so you can access them while minimizing your costs.
Additional Benefits
Consider any additional perks or benefits offered by the plan, such as dental, vision or wellness programs, to maximize the value of your health insurance coverage. Also, consider if the plan's formulary covers your required medications and be aware of copay or co-insurance costs associated with prescription fills.
About Mark Fitzpatrick
Mark Fitzpatrick is a Licensed Property and Casualty Insurance Producer and MoneyGeek's Head of Insurance. He has analyzed the insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. He has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.
Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.
