Health Insurance Options for the Self-Employed

Karen Y. Larkin
Health Insurance for Self Employed

Obtaining healthcare coverage has long been a challenge for those without traditional employment, but that may be changing because of the Affordable Care Act (ACA). One tenet of the act was to create a new risk pool, open to every citizen, regardless of employment status. Self-employed people, who may not have had previous access to risk pools, are now included in of one of the largest pools in the nation, resulting in unprecedented options for accessing healthcare coverage.

Apply Through a State Exchange

Each state offers a variety of healthcare exchange programs, available to solo entrepreneurs and individual contractors. These plans can be extended to cover family members. Depending on your income and the size of your family, you may qualify for a federal subsidy to help defray out of pocket costs. A family of four, for example, earning as much as $58,875, could expect to receive a tax credit of $7,760.

Ample Options

The state exchanges offer several plans through a variety of private insurers, like Blue Cross, Medica, Kaiser, and others. Each plan covers certain basics which include:

  • Preventative care
  • Emergency care
  • Hospital stays
  • Maternity care
  • Newborn and pediatric care
  • Mental health treatment
  • Rehabilitative services
  • Prescription drugs
  • Lab work
  • The management of chronic illnesses

Costs

These plans are categorized as bronze, silver, gold, or platinum, based on their level of coverage. These categories vary from state to state, however. The average cost of a silver plan is $328 per month, according to Forbes.

Each plan also a deductible, and premiums are based on the level of coverage and the amount of the deductible you choose. These exchanges were rolled out on October 1, 2013, and all plans are available for comparison on the website. Some states have their own sites, while others rely on the federal site. Either way, visit healthcare.gov, and select your state from the pull down menu to learn about these plans.

Apply Outside the State Exchanges

Prior to the passage of the ACA, many self-employed people purchased coverage through agents and online brokers. Those options are still available. Be aware, however, that federal subsidies are not available when you purchase outside the state exchanges. Other avenues for self-employed people include:

  • Apply as a dependent through a spouse's plan.
  • Join a professional organization that offers healthcare coverage to its members. The National Association for the Self-Employed allows members to purchase coverage through its risk pool, as does Freelancers Union.
  • Apply for COBRA coverage through a previous employer.

Keep Your Existing Coverage?

Under a grandfather clause in the ACA, self-employed people who already had plans in place prior to March 23, 2010, may be able to keep their existing coverage. To be covered by this clause, the plan must meet some, but not all, of the quality standards ushered in by the ACA.

Plans that do not meet the minimum quality guidelines of the ACA are being discontinued at the end of 2013. To be included in the grandfather clause and remain in force a plan must:

  • Impose no lifetime limits
  • End arbitrary cancelations
  • Cover the policyholder's children up to the age of 26
  • Provide a summary of benefits and coverage
  • Spend at least 80 percent of premiums on healthcare

Grandfathered plans are not required to:

  • Offer free preventive care
  • Provide a guaranteed right to appeal
  • Allow you to choose your doctor
  • Provide access to emergency care
  • Cover pre-existing conditions

SHOP

By hiring one full time regular employee you become a micro-business, and that status allows you to obtain health care coverage through the Small Business Health Options Program (SHOP) Marketplace. While micro-businesses are not required to purchase coverage through SHOP, many find that this small business exchange program enhances their options.

To qualify for the program you must report your employee's wages to the IRS and issue a W-2.

Opt Out

While the federal government doesn't recommend it, some self-employed people will simply forgo health insurance. People who choose this option will be required to pay a fine. In 2014 the fine will be $95 or one percent of their income, whichever is greater. In subsequent years the fine will rise to $695 or 2.5 percent of their income, whichever is higher.

The Impact of the ACA

Like any new law with far-reaching consequences, the passage of the ACA has been and continues to be wrapped in controversy. Some self-employed individuals will benefit greatly, while others may be forced into actions they wouldn't have chosen for themselves. With the implementation of this new act still in its infancy, its effects will continue to unfold for some time to come.

Health Insurance Options for the Self-Employed