According to the Bureau of Labor Statistics, roughly 1 out of every 10 American workers is self-employed. That number includes business owners, both small and large, and people who work on their own as freelancers. Being your own boss has a lot of perks, including the ability to decide when, where, and how you work. The downside is that when you work for yourself, your job doesn’t include any workplace benefits, such as paid leave, retirement plans, and especially health insurance.
For a long time, self-employed people didn’t have a lot of choices when it came to health insurance. If you weren’t fortunate enough to have a spouse who worked full-time and could cover you on their plan, the only way to get coverage was to spend your own money on a pricey private insurance plan. You could lower the cost somewhat by shopping around or choosing a high-deductible plan with lower coverage, but you’d still have to pay the entire amount out of your own pocket.
However, the 2010 passage of the Affordable Care Act (ACA), commonly known as Obamacare, has opened up a lot more options. Today, it’s much easier to shop for your own insurance plan and even get a subsidy from the government to cover part of the cost. It’s also easier to stay on your parents’ health plan if you’re young or qualify for Medicaid if your income is low.
If you’re self-employed – or if you want to be – here are six ideas to consider for getting the health care coverage you need.
1. Coverage From a Family Member
If you’re self-employed, but someone else in your household has a full-time job with benefits, there’s a good chance you can get coverage on their policy. It’s one of the easiest ways to get health insurance, and for many people, it’s also the cheapest.
Coverage From a Spouse
Most employers that have health plans provide coverage for employees’ spouses. According to a 2018 report from the Kaiser Family Foundation (KFF), 99% of large companies – those with 200 employees or more – and 97% of smaller companies offer coverage for spouses. However, these figures are only for spouses of the opposite sex. Only 87% of large firms and 62% of small ones cover same-sex spouses.
Although most companies provide coverage for spouses, they don’t necessarily cover as much of the cost for spouses’ premiums as they do for employees’. According to the 2018 KFF report, the average cost to insure a single worker on a company insurance plan was $6,690 in 2017. Of this amount, the employer covered $5,477, or about 82%, leaving a cost of $1,213 per year for the employee.
In that same year, the average premium cost for employee-plus-one coverage on a company health plan – that is, the cost for a worker and one other family member – was $12,879, according to the KFF. However, the average share of this cost paid by the employer was only $9,258, or 72%. That means the average out-of-pocket cost for the employee was $3,531 – nearly three times as much as the cost of self-only coverage.
So on average, if you’re a self-employed person trying to get coverage on your spouse’s plan, you can expect to pay about $2,300 per year for it. However, depending on your income, it could be cheaper for you to buy your own plan with an ACA subsidy or get coverage through Medicaid. Before you sign up for your spouse’s plan, check out other options to see how they compare in terms of both cost and coverage.
Coverage From a Partner
If you’re not married to your partner, but you live together, you might still be able to get coverage on their plan. According to the KFF report, 45% of all employers that provide health benefits offer coverage for domestic partners, which is generally defined as couples who live together in a committed relationship. This percentage is the same for same-sex and opposite-sex partners. Some city and state governments also offer domestic partner coverage to their employees.
If you want to sign up for coverage on your partner’s policy, their employer might require some documentation from you to prove your relationship. That could be a state or municipal domestic partnership registration, a state civil union license, or a partnership affidavit form provided by your health insurer. The latter is a statement signed by both of you swearing that you live together, share living expenses, are in a committed relationship, and are not married to anyone else.
Coverage From a Parent
If you’re age 26 or younger, you can get health coverage from a parent’s insurance plan. The ACA requires all companies that provide health insurance for employees’ children to make this coverage available for children up to 26 years old.
You can still get coverage under a parent’s plan if you don’t live together – or even in the same state. However, if you live in a different state, you might have to pay extra to see providers who aren’t in your parent’s local network. Check the details of your parent’s plan to find out about coverage and costs before signing up.
Also, be aware that if you’re on a parent’s health plan, your parent will probably receive notifications about your health care. If you don’t want Mom or Dad knowing every time you see the doctor or have a medical test, you’ll need to find a plan of your own.
2. Coverage Through an Organization
Certain professional and trade organizations offer health insurance as a benefit for members. These include:
- Affiliated Workers Association (AWA). The AWA is a national association of over 7,000 self-employed people from across the country, including independent contractors, small business owners, and entrepreneurs. It doesn’t offer full-scale health insurance for its members, but it has fixed indemnity plans that cover major medical needs, such as emergency room care, hospital stays, and outpatient surgery. It also offers dental care, vision care, and prescription plans.
- Association for Computing Machinery (ACM). The ACM is an association of computer professionals, such as coders, developers, and database engineers. Through a partnership with HealthInsurance.com, the ACM offers a variety of health plans for its members. These include dental plans, short-term health insurance, and major medical plans, which cover large emergency costs but don’t cover basic care.
- Writers Guild of America West (WGAW). The WGAW is a labor union representing professional writers and producers in the film, television, and new media industries. Members who earn a certain amount each year through their writing can qualify for health coverage through the WGAW.
- Freelancers Union. This association represents freelancers in all fields from across the U.S. It has formed partnerships with a couple of different health insurers to offer health care plans in California, New Jersey, New York, and certain parts of Texas.
If you don’t qualify for membership in any of these groups, check to see if any other organization you belong to can provide health insurance for you. Possibilities to consider include other professional organizations, alumni associations, and your local chamber of commerce.
3. Health Insurance Marketplaces
The ACA made two big changes in the marketplace for individual health insurance plans. First, it established online marketplaces for each state where you can shop for plans, and second, it created subsidies to cover part of the cost for lower-income Americans.
Both of these changes make it easier to find affordable health insurance if you’re self-employed. The marketplaces allow you to compare all available plans in your state and see which one offers the best value. And if even that plan is more than you can afford, the subsidies make it easier to pay for it.
Finding Affordable Plans
You can shop for a health plan in most states by visiting the Health Insurance Marketplace at HealthCare.gov. If your state has its own separate marketplace, HealthCare.gov can direct you there. In most cases, you can only purchase a plan here during the annual open enrollment period, which runs from November through mid-December. However, you can apply at other times of year if there’s been a recent change in your life that affects your health coverage, such as moving to a new state, having a baby, or losing your job.
According to the Centers for Medicare & Medicaid Services (CMS), the average premium for a Marketplace health plan was $621 per month in 2018. However, this cost varies depending on where you live and how much coverage you want.
All Marketplace plans, even the cheapest ones, cover basic preventive care, such as vaccines and screening tests. However, the rest of your coverage will depend on which type of plan you select. Plans fall into five tiers based on their coverage and premium cost:
- Platinum. These plans have the highest premiums, but they also provide the most coverage. A platinum plan will cover 90% of your health care costs and have a low deductible.
- Gold. The next-highest tier, gold plans cover 80% of your health costs. They’re a bit cheaper than platinum plans.
- Silver. This is the standard level of coverage. Silver plans pay about 70% of your costs for both routine and emergency care.
- Bronze. These budget plans have very high deductibles and don’t cover most routine care. Overall, they will cover about 60% of your health care costs.
- Catastrophic. These plans are available only to people under age 30 and people who can’t afford one of the above plans. Premiums are very low, but deductibles come to thousands of dollars. You can’t use a subsidy to pay for a catastrophic plan, so if you qualify for a subsidy, a standard plan could be cheaper.
Health Care Subsidies
If your household income is between one and four times the federal poverty level, you can receive subsidies to pay for part of your health care costs. There are two main types of subsidies:
- Premium Tax Credits. These credits reduce the monthly premium you have to pay on a health plan purchased through the Marketplace. The lower your income is, the larger the credit you can receive. These credits are available for all plans of Bronze level and up. To see if you qualify for a premium tax credit and how much you can save, visit HealthCare.gov.
- Cost-Sharing Subsidies. If you’re eligible for a premium tax credit, and your income is no more than 250% of the poverty level, you can also receive cost-sharing subsidies. These subsidies lower your out-of-pocket costs for health care, such as deductibles and copayments. They are not funded by the federal government, but the ACA requires insurance companies to provide them for low-income buyers. However, you can only receive these subsidies for plans of Silver level or higher.
Between tax credits and cost sharing, ACA subsidies can lower the cost of a Marketplace plan quite a bit. For the year 2018, premium tax credits reduced the average cost of a plan from $621 per month to just $89, according to CMS. And in 2019, the KFF says, cost-sharing subsidies reduced the out-of-pocket maximum an individual could pay for health care from $7,900 to no higher than $6,300, with some individuals paying as little as $2,600.
Pro Tip: Another potential option to cover the cost of medical expenses is a health sharing ministry such as Medi-Share. Monthly premiums are typically lower than money health insurance policies.
If your income is low enough, you can get coverage through Medicaid. If you enter your income and location on the Health Insurance Marketplace, it can tell you whether you qualify.
Although Medicaid was created by a federal law, each state runs its own Medicaid program, and not all of them provide the same benefits. By law, all Medicaid programs must cover certain essential benefits, such as doctor visits, hospital care, and lab tests. However, other benefits – such as prescription drugs, physical therapy, and eye care – are only available in some states. You can learn about the coverage your state’s program provides at Medicaid.gov.
Unfortunately, depending on where you live, you might find that you don’t qualify for either Medicaid or a subsidized Marketplace plan. This problem, called the “coverage gap,” arose because of a court decision. When the ACA passed in 2010, it expanded the Medicaid program to cover Americans with incomes up to 138% of the federal poverty level. However, in 2012, the Supreme Court ruled that states could not be required to make this change, and 14 states have chosen not to do so.
In these states, you often need an income well below the poverty level to qualify for Medicaid. According to the KFF, the median income limit for families in these states is only 43% of the poverty level – just $8,935 per year for a family of three in 2018. Also, in nearly all of these states, adults without children can’t receive Medicaid no matter how low their income is.
However, under the ACA, subsidies are only available for people with incomes between 100% and 400% of the poverty level. Initially, this wasn’t a problem, since Medicaid covered everyone below the poverty level – but now, in these 14 states, it no longer does. That leaves many poor workers in these states with incomes too high to qualify for Medicaid but too low to qualify for ACA subsidies. The KFF estimates that 2.5 million Americans – mostly, childless adults – are in this situation.
If you’re in this position, there’s not a lot you can do about it. You can still buy a health care plan from the Health Insurance Marketplace, but without a subsidy, the cost is likely to be burdensome. Your best bet is to see if you can get health insurance from a family member or through one of the other options listed here.
If you’re at least 65 years old or disabled, you can get health coverage through Medicare, even if you’re still working. This program has several parts, each with its own costs and types of coverage.
- Part A. Medicare Part A covers all forms of hospital care: inpatient care, surgery, lab tests, and a stay at a skilled nursing facility or hospice. It also provides some coverage for home health care. Most people who qualify for Medicare don’t have to pay premiums for Part A coverage, according to Medicare.gov. However, they still have a deductible of $1,364 per year, along with coinsurance for hospital stays over 60 days.
- Part B. Medicare Part B covers doctors’ visits, outpatient care, some forms of medical equipment, and some types of home health care. There is a premium for Part B coverage that varies depending on your income. If you make less than $85,000 per year (or $170,000 for a couple), you’ll pay a premium of $135.50 per month for the year 2019. People with higher incomes pay higher premiums, up to a maximum of $460.50 per month. In addition, Part B coverage has a $185 yearly deductible and 20% coinsurance for most services.
- Part C. There are many services Medicare Parts A and B don’t cover, including long-term care, dental care, vision care, hearing, and health and wellness services. To cover these costs, Medicare users have the option of purchasing a Medicare Part C plan from a private insurer. Coverage and costs – including premiums, deductibles, and coinsurance – vary depending on which plan you choose.
- Part D. Medicare Parts A and B don’t cover the cost of prescription drugs, except for drugs received during or right after a hospital stay. Some Medicare Part C plans include drug coverage, but if yours doesn’t, you can get it by purchasing a separate Medicare Part D plan. There are several different plans available with varying premiums, deductibles, and copayments. People with high incomes (over $85,000 for one person or $170,000 for a couple) must pay a monthly surcharge on top of their plan’s regular cost.
When you add up the premiums, deductibles, and coinsurance for all four parts of Medicare, the total cost can be quite high. According to a 2017 analysis by The Motley Fool, the average American on Medicare pays $635 per month out of pocket. For people with chronic health conditions, such as diabetes or congestive heart failure, the cost can be considerably higher.
So even if you’re eligible for Medicare, you might be better off sticking with a Marketplace plan, especially if you can get a subsidy for it. However, as this fact sheet on Medicare and Marketplace plans explains, you can’t receive a subsidy for a Marketplace plan if you’re eligible for premium-free Medicare Part A. This applies to you if you’re receiving Social Security or Railroad Retirement Board benefits, are eligible to receive them, or if either you or your spouse had a government job that qualifies you for Medicare coverage.
6. Part-Time Work
If you can’t find an affordable policy any other way, see if you can get a part-time job that provides health insurance. Most companies don’t provide benefits to part-time workers, but there are a few that do, including:
- Costco. Part-time employees at Costco become eligible for health benefits after they’ve worked at the company for at least 180 days. The plan includes vision care, hearing aids, prescription drug coverage, and behavioral health. Part-time employees can also participate in a company dental plan.
- Lowe’s. This home retailer offers a special part-time medical plan for its part-time employees. Part-time employees can also qualify for dental and vision care. Both full-time and part-time employees must work at Lowe’s for at least 30 days to be eligible.
- REI. Part-time employees at REI qualify for the same benefits as full-time employees if they put in an average of 20 hours or more per week. They get a choice of several medical plans and may choose to buy extra coverage for vision care, orthodontia, and long-term care.
- Starbucks. Workers at Starbucks who work at least 240 hours every three months are eligible for a choice of health insurance plans, as well as dental care and vision care. However, they don’t qualify for this benefit until they’ve already put in at least 240 hours in a single quarter.
- UPS. Part-time employees at UPS qualify for the TeamstersCare health plan, which includes hospital and outpatient care, prescription drugs, dental care, vision care, hearing, and behavioral health. Employees become eligible for the plan after putting in at least 225 hours in a given three-month period.
- Whole Foods. All employees at Whole Foods who work at least 20 hours per week are entitled to health care benefits. According to Glassdoor, the company’s plan is a PPO and includes prescription drug coverage. However, you must work at Whole Foods for at least 60 days before benefits kick in.
One downside of taking a part-time job to get health coverage is that you’ll probably have to cut down a bit on your business or freelance work. On the plus side, it will provide you with a steady income stream during times when your business is going through a dry spell.
Even with the changes made by the ACA, it’s certainly not as easy for self-employed people to get health insurance as it is for those who work full-time traditional jobs. If you’re having trouble finding an affordable policy, you might be tempted to give up and go without health insurance.
The ACA’s individual mandate, which required everyone to carry health insurance or pay a tax penalty, was repealed in 2017. A few states have passed individual mandates of their own, but even if you live in one of those states, the penalty is probably less than the cost of an insurance policy. So if you’re young and healthy, you might figure that it will cost less to pay for an occasional doctor visit out of your own pocket than to pay hundreds of dollars every month for an insurance policy.
However, experts say that going uninsured is a terrible idea. Without health insurance, a single visit to the emergency room can cost thousands of dollars. If you’re admitted to the hospital for emergency surgery or other treatment, you could face bills of $20,000 or more. That’s enough to wipe out many people’s emergency savings and then some.
Instead, see if you can find an inexpensive health plan, such as a Catastrophic-level plan from the Marketplace. These policies don’t provide a lot of coverage, but they can at least shield you from disastrously high costs.
Do you know of any other health care options for self-employed people? Let us know in the comments.