Health Insurance Options For the Self-Employed

medical equipmentA good proportion of large debts, especially those that lead to bankruptcy, are at least partially caused by big medical bills that couldn’t be paid. To avoid being placed in this situation, most of us look to take out health insurance for both ourselves and our families, but for the self-employed, the options can be much more expensive. Here are some of the options that you might want to explore:

1. Continue Your COBRA Coverage

Assuming that you didn’t leave your previous job because of gross misconduct,¬†you can continue your current coverage through COBRA for 18 months after you become self-employed. However, you’ll be required to pay the employer part of the plan as well as your own, so it’s not a cheap option. As well as being expensive, it’s only a short-term option, but it can save you the hassle of having to find a new option straight away after becoming self-employed.

2. Combine An HSA with a High Deductible Health Plan

This option allows you to pay money tax-free into a Health Savings Account (HSA) to fund medical expenses that aren’t covered by your high deductible plan. This can work well if you’re relatively healthy as it’s likely that your high deductible plan will cover big expenses (for example, if you were to have a heart attack) so you’ll need the money in your HSA to cover pretty much everything else. Because of this, it’s wise to have a decent-sized lump sum ready to deposit into a HSA in case you’re hit with health-related expenses soon after becoming self-employed. If you’re not in a good position to fund a HSA up front, this might not be the best option for you. Read my article about HSA’s and if they are right for you.

3. Look for part-time work with health insurance benefits. This won’t be a particularly feasible option, because there aren’t all that many employers that will offer health insurance benefits for part-time employees, but if you can find one that does, there is the possibility of fitting some part-time work in around your self-employed work to benefit from the health insurance perks.

4. Become a member of associations and unions. You can often get group health insurance if you’re a member of trade associations or unions. In most cases, this will cost less than having health insurance through COBRA, but it can still be a relatively expensive way of getting health insurance when you’re self-employed.

5. Insure yourself. If other options won’t work for you or just don’t seem attractive enough, you may look towards self-insurance instead. Instead of paying insurance premiums to an insurance company, you take whatever you would have paid and put it in an easy-access account, preferably one with good interest. The important thing is that you can get to it as and when you need to without incurring penalties. Whenever a health care or medical expense crops up, you simply withdraw however much you need and carry on paying yourself a “premium”. This can be a good option if you’re in good health and don’t have many health-related expenses, because it means that you can pay for exactly what you need.

6. Shop around. It pays to shop around if you want to take out an individual health insurance plan, because there can be big discrepancies between premiums. Good places to look are eHealthInsurance and Health Insurance.

Not having health insurance can be an incredibly costly mistake and in some areas, you may not be treated at all if you don’t have some kind of insurance in place. Getting health insurance when you’re self-employed can be tricky but it’s not impossible, because there are options out there for you. Don’t gamble with your health when you’re self-employed. At least get a policy that is affordable and covers you for catastrophic events.

(photo credit: cote)

  • Mac

    Or, if you’re young enough still (26 years old or younger), you can stay on your parents health care plan thanks to the new health care bill:

    • Sally Aquire

      That’s good to know!

  • Gina

    I know a few people who have naively opted to go without any health insurance. Such a big mistake and so risky! It really should be a basic need–like food, electricity, etc. This article is a good review of your options.

    • Winston

      Well, there are some who are in such a good shape that they don’t need any health insurance. And on top of that, they also take good care of their body that reduces their likelihood of getting major illness in the future. My family belongs to this group of people. The only type of illness that we have to deal with for the last ten years in America is seasonal flu. And we can take care of that ourselves without every going to doctor. So, we will take the chances.

      • katie

        I said the exact same thing 6 months ago. I had never had a single issue in my life… EVER…..and then bam. I set the record for the biggest kidney stone they had seen at my hospital. It shifted and blocked off my kidney. 2 1/2 weeks in the hospital. 3 surgeries and 60,000+ dollars worth of hospital bills. My new insurance kicked in 4 weeks before it happened. I had a 500 dollar deductible. This would have ruined me without insurance. You never know what is going to happen. When you get hit with hospital bills that you can’t pay and file for bankruptcy we all end up paying for it.

  • Karmella

    If you insure yourself, does that create any “gap in coverage” problems? I have only a little understanding of it, but I know that sometimes pops up as an issue for people.

  • Anonymous

    Not leaving our job is important remembering that we have health insurance from it. It is as a way to insure our self. Health insurance can give us much benefit especially for our healthy and cost need.