The Reality of Health Care for Freelancers

According to Statista, the way full-time freelancers in the United States obtain health insurance can be broken down as follow:

• 24% have a self-purchased plan

• 21% receive health insurance through Medicaid

• 19% have Medicare

• 15% receive health insurance through their spouse’s plan, including domestic partners

• 12% have health insurance through their employer’s plan

• 7% are included in their parents’ plans
  

Average Cost of Health Insurance for Self-Employed Individuals

Everyone’s health insurance rates will vary. In 2021, the average cost of health insurance across all tiers of coverage is $495 per month, according to ValuePenguin. While these prices have fluctuated over the years, the good news for freelancers is that from 2020 to 2021, average costs have decreased 2.04%.

Of course, the price can be much lower if you qualify for tax subsidies – more on that later. The location also plays a significant role in determining your health insurance cost. For example, your monthly cost in New York can be $701, while in New Hampshire, it can be around $335.

Tax Subsidies for Health Insurance

Thanks to the Affordable Care Act (ACA), freelancers can access federal tax credits (subsidies) to help pay for individual health insurance. These tax credits are available to households with incomes of at least 100% of the deferral poverty level (FPL), not more than 400% of FPL. In addition, to be eligible for the subsidies, you mustn’t have access to Medicaid or any employer-sponsored health insurance plan that’s considered affordable.

For example, for coverage effective in 2021, the 2020 poverty level is used. The annual upper annual income for an individual is $51,040 and $122,720 for a family of five in the continental United States. Alaska and Hawaii have above-average poverty lines, averaging $39,875 and $36,700 respectively for an individual.

When you file a marketplace application, the form will help you determine if you qualify for tax credits and other savings on your health plan.

Finding Health Insurance Options for Freelancers

While a significant challenge for freelancers is finding health care options, the other hurdle is navigating the myriad of options to choose from.

In the Marketplace

The Affordable Care Act (Obamacare) has made things a bit easier for freelancers. The marketplace is an online resource where anyone can sign up for a health plan. In most cases, picking a health plan from the marketplace is the best option for freelancers.

The leading marketplace is available at healthcare.gov, open to those of all types of employment. California, Colorado, Connecticut, Idaho, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Washington, and DC have state-based websites.

To apply for health plans in the marketplace, you must do so within the open enrollment period: through November through mid-December for plans starting January 1 of the following year. **Note that because of the COVID-19 pandemic, the open enrollment period for 2022 is from November 1, 2021, through January 15, 2022.**

If you miss the open enrollment period, you may qualify for a special enrollment. Life changes such as the birth of a child, loss of an employer plan, and getting married quality for special enrollment periods.

Health plans in the marketplace are divided by metal tears. They specify the cost, level of coverage, and amount of out-of-pocket you can expect under that policy. Marketplace plans are divided as follow:

Catastrophic: Low monthly premiums. Highest cost of care. Covers 50% of out-of-pocket expenses.

Bronze: Low monthly premiums. High cost of care. Covers 60% out-of-pocket expenses.

Silver: Moderate monthly premiums. Moderate cost of care. Covers 70% of out-of-pocket expenses.

Gold: High monthly premiums. Low cost of care. Covers 80% of out-of-pocket expenses.

Platinum: highest monthly premiums. Lowest cost of care. Covers 90% of out-of-pocket expenses.

Nonetheless, all plans offered through the marketplace must cover 10 essential health benefits, plus birth control, breastfeeding, and pre-existing conditions. The 10 important benefits covered through these plans include:

• Outpatient care

• Emergency services

• Hospitalization

• Pregnancy, maternity, and newborn care

• Mental health and substance use disorders services

• Prescription drugs

• Rehabilitation

• Laboratory services

• Preventive and wellness services

• Pediatric services

Outside the Marketplace

There are two options to seek health insurance outside the marketplace: through your spouse or domestic partner’s plan, your family’s plan, or with COBRA coverage.

Your spouse or domestic partner’s plan: If your spouse has coverage through their job, you may be able to join their employer-based plan. Because employer-based plans often have group rates, you may be able to access a more affordable plan. Even if you aren’t married, you may qualify as a domestic partner if you live together. Another similar option is to be included in your parent’s plan, which you can stay in until you turn 26. You can join or remain on your parent’s plan even if you are married and don’t live with your parents.

COBRA Coverage: If you’re just about to leave your employer to make the jump as a full-time freelancer, COBRA, or continuation coverage, may be an option for you. This allows you to continue your group health benefits through a former employer for a limited amount of time while you find a new plan. If you’re eligible, you should receive a letter from your employer or insurance company asking you to opt-in or waive COBRA; then, you have 60 days to decide. However, keep in mind, you’ll be responsible for paying 100% of the cost, and additional admin fees, so COBRA is usually one of the most expensive options.

These options are available outside the open enrollment period and can be a viable solution for some freelancers.

Working With an Insurance Advisor

Navigating the marketplace can be overwhelming as well. A health insurance broker or advisor can help you research, buy, set up, and manage your health insurance plan. For example, Dr. Noor Ali is a licensed physician and surgeon who also happens to be a licensed life, health, and annuities professional. As a health insurance advisor, she helps freelancers and self-employed individuals find healthcare plans that meet their needs.

The best part about working with an advisor or agents is that it’s free. A health insurance agent won’t charge anything for their consultation services. The insurance companies pay agents, so you don’t have to worry about spending more money getting the help you need to find the right health insurance plan.

Applying for Medicaid

Medicaid is available to low-income individuals who need help paying for healthcare. Each state has different requirements to qualify for Medicaid, so that the guidelines might change. But, as a rule of thumb, anyone making up to 133% of the federal poverty level could qualify. As of 2021, this means individuals making $12,880 in the continental United States will be eligible for Medicaid assistance.

Alternative Health Care Options

Now, if you are considering or healthcare options outside the mainstream and marketplace options, that’s a viable option too. Many of these options offer greater flexibility and can still be tax-deductible as medical expenses.

Telehealth
Telemedicine is nothing new, but after the COVID-19 pandemic, telehealth services finally peaked and reached the level we’ve wanted them to reach for decades. Various telehealth and preventative care companies can be a viable option for freelancers looking for specific medical services.

Sidecar Health: Offers affordable, quality health insurance plans that cover your medical expenses before seeing a doctor. After receiving care, you pay your doctor directly. You then upload a photo of your bill to the app, and you’ll see the total benefit amount for the benefits services you received.

MeMD: Connect with a healthcare provider online. MeMD provides many services from urgent care, men’s health, therapy, and women’s health. They provide you with affordable services and personalized care. Most services average between $64 to $85 per visit, making it great to treat specific ailments or medication refills.

Sesame: Get access to a dynamic marketplace of doctors and specialists that treat over 120 conditions. The best part of Sesame is that you can see exactly how much you’ll pay per doctor visit and even prescription meds. They offer both in-person doctor visits and telehealth visits. Most of their services range between $25 to $55 per visit, and you can save even more by subscribing to Sesame Plus.

Short-term Insurance

Another option, one I’ve used in the past, is short-term health insurance. Short-term insurance is an affordable solution for those who need healthcare coverage during transitional periods, anytime outside of the open enrollment period. Insurance plans are available for $55 per month, compared to at least $250 for significant coverage.

Most short-term health insurance plans cover prescription medications, emergency visits, doctor appointments for pre-existing conditions. However, these insurances won’t cover treatment for pre-existing conditions, pregnancy and maternity care, mental health, and other items. These types of insurances don’t guarantee the essential health benefits and protection in marketplace plans.

Short-term insurances may also have waiting periods, meaning they won’t cover certain conditions for some time at the beginning of the plan. Of course, these insurances also carry a higher deductible. But, if you want to maintain some level of coverage–particularly for emergencies–short-term insurance plans are a great option.

Freelancers Union

The Freelancers Union helps freelancers get access to health insurance plans designed for them. They can also provide dental coverage, life insurance, and even disability insurance.

Similarly, other professional organizations can help self-employed workers access a group health plan, something very similar to what you can get through a regular employer. The local Chamber of Commerce may also offer group health insurance plans for freelancers and self-employed individuals in certain areas. These types of options are known as association health plans (AHPs).

Flat-fee DoctorsSince you can deduct many of your medical expenses during tax season, you might forgo the health insurance plan altogether and stick with cash. Many doctors offer flat-fee monthly subscriptions or packages that give you access to medical care. Usually, doctors and specialists reserve flat-fee services to cash patients. For example, a chiropractor may provide spine adjustments for a flat fee; a primary healthcare provider can offer consultations for a flat fee, and so on.

While this option doesn’t take care of prescriptions, hospital, and laboratory costs, it can at least save you money on the doctor’s side.

Health Savings Accounts

While this isn’t technically an insurance plan, it can help pay for medical expenses. A health savings account (HSA) enables you to make pretax contributions, which means you don’t pay income tax, and then you can use that money for qualified medical expenses.

Essentially, an HSA helps you have funds for copays, deductibles, prescription drugs, and other out-of-pocket expenses. Not all plans let you use an HSA, and most carry high deductibles. Nonetheless, it’s an option worth considering.

Insurance Terminology to Understand

As you’re navigating health insurance, you’ll most likely have a hard time understanding the terminology. At times, it can easily feel like a foreign language. So, here’s a short glossary of what these terms mean.

Catastrophic plans: Often the cheapest plans with higher deductibles but enough coverage to protect you against worst-case scenarios.

Coinsurance: The percent you must pay each benefit period after you have met your deductible. For example, if your coinsurance is 20%, your insurance will cover the 80% left.

Copay: The amount you pay your healthcare provider when you receive services. Not all plans have copays.

Deductible: The amount you pay for your healthcare services before your health insurance pays. For example, if you have a $2,000 deductible, you will expect to pay the first $2,000, and then your health insurance will cover the rest.

HMO (Health Maintenance Organization): An HMO plan offers services only with specific providers.

Out-of-pocket cost: Costs you must pay when receiving healthcare services.

PPO (Preferred Provider Organization): PPO plans have more flexibility than HMO but have higher deductibles. Here, you can access out-of-network providers and still expect your plan to cover some charges. However, PPO plans require a primary healthcare doctor to write referrals for each specialized service you receive.

Premiums: All payments you make to your insurance provider to keep your coverage.

Factors to Consider Before Choosing a Health Insurance Plan

Before choosing a policy, there are many factors to consider. Of course, you have to consider your medical and financial needs. So, if you’re relatively young and healthy, you may be able to get a high-deductible or catastrophic plan to at least have coverage in an emergency. If you have a chronic condition, a plan with higher premiums but lower deductibles might work better. In the end, it all depends on your specific needs.

Cost: Ideally, you want to budget at least 4-6% of your monthly net income (after taxes) to pay for health insurance. So keep this in mind while choosing a policy.

Prescription coverage: Each plan comes with a prescription drug list of covered medications and the costs. Not all plans cover all medications, so check the list against your current prescriptions to make sure they’re covered.

Access to doctors: Most plans have a network of providers and care facilities. However, some plans will not cover out-of-network expenses, while others will require approvals. Evaluate the plan’s networks to ensure that at least your primary care provider accepts your insurance.

Limitations: Make sure to ask and learn about the things your plan doesn’t cover. Elective surgeries and alternative therapies may not be covered with insurance. Many plans have limitations to the providers they’ll cover and might not include dental and vision coverage.

Resources: Some plans offer extensive preventative care services that can bring additional savings in the long run. For example, they may offer rebates or discounts at health clubs; have rebates if you commit to a smoking session, weight loss, or health monitoring program; and even give you access to alternative health care.

How to Budget for Health Insurance as a Freelancer

Just as you set a budget for all your financial needs, health insurance should be part of your budget. This means budgeting for your premium, deductible, and out-of-pocket expenses. Here are a few options to budget for your health insurance expenses:

Factor it into your prices: Remember that you should expect to spend between 4-6% of your net monthly income toward health insurance. You might want to increase your prices by this percentage.

Consider opening an IRA: This is a great way to lower your taxable income, which will help you increase your subsidy. An IRA is an excellent choice if you don’t have a traditional 401(k) option.

Get a health savings account: Contribute to an account without paying income tax. The money you contribute to the HSA gets deducted from your tax bill each year. This will help you save money in the long run.

Final Thoughts

Consider how much you currently spend on medical expenses. Write a list of your must-haves when it comes to insurance, and start creating a budget for all your insurance needs. At last, find ways to cut your costs wherever you can. Online prescription refills, telehealth services, and other online healthcare services can help you cover some healthcare needs without committing to a monthly premium.

Affordable freelance healthcare is possible. Of course, the right plan varies for every individual. My suggestion is that you reach out to a health insurance agent, especially one that handles freelancers. They can help you compare different options and explain all the different savings opportunities available.

Before you make a decision, take the time to research different options. Remember, having healthcare coverage of any kind is always better than none at all.