Buying Health Insurance as a Newly Self-Employed (or Out of Work) Person: What You Don’t Know can be Challenging
Americans are making the conscious decision today more than ever to be self-employed. This may mean you have left corporate America, bought an existing franchise, started a service-based business, freelanced, or struck out as a “solopreneur” as I have. While the pros of working for yourself can outweigh the cons, there is one major downside to consider: finding and buying health insurance. The benefits and perks from a corporate job are no longer handed to you in a package deal.
Becoming self-employed or working as a contract employee can be exciting! But as a self-employed person, you must not only create your own destiny, but also find the best health insurance for you and any dependents.
Solopreneurs and married partners often only qualify for individual insurance plans, with limited plans to choose from. Many small businesses and startups don’t meet the minimum threshold to offer group insurance, preferring to hire contractors instead of employees, don’t yet offer benefits, or never intend to. On the other hand, if you have purchased an existing business or plan to operate a business by training and retaining talent, you should strongly consider providing a health plan as part of a benefit package.
Things Will Be Different When Buying Your Own Health Insurance:
Individual policies will be different in structure and services available than one provided by a large employer. I often speak with intelligent people striking out on their own. These contractors, lawyers turned bike shop owners, mid-level managers opening coffee shops, designers, software engineers and veterinarians are all smart people who are passionate about their new business, but simply are unaware of the complexities of everyday health insurance and benefits.
Find Help When Buying Health Insurance!
For health insurance, find a good local insurance agent. Who is going to determine what is right for you? Ask the professionals you already work with. I routinely receive referrals from several Farmers, State Farm and Country Financial agencies, business coaches, accountants, or investment advisors. These are professionals who often refer me to their best customers for assistance.
If this does not provide results, consider your local Chamber of Commerce or business groups. Your local chamber office’s main purpose is to build and provide these relationships. I have been a member of a BNI (Business Networking International) chapter that helps me navigate finding services to succeed in my business. This networking and education organization vets its members and operates nationwide. They will allow guests to visit local chapters free of charge. Some local libraries also may have navigators. They are volunteers who can enroll but are not permitted to recommend plan options.
Don’t be confused by the difference in deductibles, co-pay, co-insurance and networks; a professional health agency can explain the difference to you. Why does this matter?
Before he came to me, an owner of three businesses took his daughter to a local hospital for a sports injury. She had several scans and procedures on her head and arm. The previous year the hospital was no longer a network provider for the father’s policy. The hospital charges were rejected or treated as out of network, doubling his costs. He quickly found me through his business coach the following year.
An agent is in touch with the programs in your region. They spend time attending local training given by hospital and insurance groups in your area. A good agent takes a holistic approach to finding you a program and may use a series of plans to replace your lost coverage. They may present access to a plan not found on the shopping websites. They may explore your need to cover yourself and your family with supplemental policies for major events or recommend dental, vision. The local agents are most likely going to be up on the latest changes. If you have a question, your local agent is a resource and can offer suggestions or assist with finding you service.
If there is a shortage of health agencies in your area, or you live or work in a smaller community, you may consider working with a reputable national agency. These agencies often have free 800 lines and can get you in touch with a licensed agent in your region. Do I recommend the large online brokerages? NO, they are simply dumping plan choices online, but offer little local expertise.
If You Have a Spouse, Talk With Your Spouse Before Buying Health Insurance:
This may seem like a basic suggestion but many times it gets overlooked.
Some of us are likely to use healthcare coverage more often than others for anything from chronic illness to regular doctor visits. Who is important to your spouse? I often start a conversation by asking, “Do you have a favorite Doctor? OBGYN? Hospital that you favor? Are there medical conditions, mental health providers or chronic conditions like diabetes we need to consider”? It is surprising how often these basic questions get overlooked in the rush to find a new program, and they can cost you money or unwelcome results. Your new change in plan choice may change your spouse’s choices.
Timing Is Key When Buying Your Own Insurance!
There have been changes in recent years in individual and small group health plans. There are now timelines that will affect your transition to private health insurance. Count on 60 days or less to transition to a new health plan upon the loss of your previous plan. Do not expect to buy health insurance and have the program begin coverage the following day.
Paperwork, There Is A Lot of Paperwork in Health Insurance!
When you leave your employer, be aware that you will need a letter from Human Resources called a “loss of credible coverage”. This is a key tool for you and your family to transition to an individual or family plan and must be submitted before many insurance companies will accept your application. If your state has its own insurance exchange or “marketplace” these letters must be submitted to gain a mid-year enrollment.
If you miss the open enrollment period or your 60 day enrollment window for buying health insurance, you can go up to a year without coverage. Note this deadline has gotten smaller over recent years and may continue to shrink as rules evolve.
—Options When Buying Your Own Insurance—
Family Coverage Plan (If Your Spouse Is Employed)
Even if you are not legally married, you may qualify as being in a domestic partnership. If you and your partner share a home and live a domestic life together, you may be eligible for coverage under an employer’s Family Coverage Plan. If your spouse works, his or her employer may provide long overlooked health benefits. Often those working have not considered this as it likely will have a cost associated for the family members. This may be restricted by enrollment periods. Some larger organizations like Starbucks offer health care with a part-time employment package.
State and Federal Marketplace Health Insurance Options:
You may hear a lot of talk about the Health insurance marketplace. Working with a qualified agent they may use The Health Insurance Marketplace as a tool to enroll you. This provides great coverage options for those who are self-employed. You are eligible to enroll through the marketplace if you are an independent contractor, consultant, freelancer, or other type of independent worker who does not have any employees. There are several categories of coverage to choose from with plans containing range of premiums.
Help paying for a plan may be available. There are income guidelines that may qualify you for a tax credit to offset monthly cost. Marketplace credits are based on your estimated net income for the year you’re getting coverage, not last year’s income. When you fill out a Health Insurance Marketplace application, you’ll have to estimate your net self-employment income and gross family income for your household.
Higher Deductible Plans With Lower Premiums:
This type of plan is most affordable in terms of monthly costs. While paying higher deductibles, you pay lower monthly premiums which may be extremely beneficial if you and others on the plan are in good health and not prone to unexpected accidents or traumas. Some of these plans feature the ability to work with Health Savings Accounts, or HSA’s. These may not be for everyone. Expect to bear the cost of local office visits as most do not include an established copay.
Private Supplemental Insurance:
These can work alongside major health plans to cover major medical events. I recommend this strategy every time where appropriate to every customer. Coverage through a private insurance company is worthwhile if you are willing to go the extra mile for a modest cost. In the long run, it can provide financial protection. These programs will reimburse you in cases of a major hospital stays, illnesses such as cancer, accidents, and may even provide short or long-term disability. If you are the primary wage earner, these coverages can provide you with much needed financial breathing room. They often have specific features so review with a qualified agent.
Millions of Americans are given low cost or free coverage through Medicaid including those with low income and disabilities. Even if you don’t qualify for Medicaid because of your income, it is worth applying as you may be eligible in your state. There is no open enrollment period, therefore you can apply at any time.
This may be the easiest but most expensive option. Essentially you can extend your existing company health plan but without help from your previous employer; you incur the full cost. The Consolidated Omnibus Budget Reconciliation Act guarantees your eligibility to temporarily remain under your employer’s health insurance plan after being let go or having a reduction in employment. According to the U.S. Department of Labor, there are still eligibility requirements. COBRA would not be an option for you if you were not previously employed. Note: if you accept a COBRA plan you may not change until the next open enrollment.
Note: All of this advice on buying health insurance applies to people that have lost their benefits from getting laid off, or any other way (other than COBRA, that has certain requirements to be available).
We went with COBRA the first 18 months (the maximum we could) because we have family members in 4 different states. Our COBRA offered in network coverage for all of us, while most of the individual plans we looked at did not cover that many states.
This article was written by Keith Watson, a licensed Insurance Agent
Keith currently calls Portland, Oregon home . He brings years of as a manufactures representative with major name brands, product training and Human resources, focused on helping simplify complex contracts, products and service. As a Dad, Keith finds time to volunteer at local community events, fund raising spaghetti dinners and monthly pancake breakfasts. “It’s fun to continue these traditions and we give something back to the kids”. He has spent the last 12 years working with Oregon, Washington Idaho and Texas business owners, assisting them in selecting both products and services that were right for their business.
He continues that tradition today with in the Health Insurance Industry “I strive to making the process as simple to understand as possible.”
For the past seven years his agency provides life, health, retirement and long-term care insurance needs of small businesses and middle-income families and individuals.