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One of the biggest concerns (with good reason) I hear about making the switch from employee to freelancer is the lack of health insurance. With health care coverage costs rising significantly, this is a legitimate reason to be anxious. Thankfully, there are many options out there that are affordable. You need to have a health insurance policy lined up before you leave to make sure you and your family is protected. There are more choices for health insurance as a freelancer available now than there were 10 years ago, and more alternatives to corporate insurance plans are emerging monthly.
Here is just a sampling of the possibilities:
1. Use COBRA
(COBRA) enables employees up to 18 months of extended coverage (and more if you’re pregnant) from your employer’s insurance policy if you pay your own premiums. This is a great option for those planning to make the leap to freelancing but don’t want the added stress in the transition period. Usually, the premiums are costly, but the coverage is more extensive so it may be worth using for several months until you can get a less expensive policy in place.
2. Healthcare Ministries
The Alliance of Healthcare Sharing Ministries offers members a wide variety of options to pool your money with others for affordable monthly premiums. Some programs guarantee you won’t spend more than a specific amount each month. This is VERY helpful for budgeting if your freelance career is unpredictable. I HIGHLY recommend this option because it’s simple, straightforward and easy to understand. Plus, it’s people helping other people. When you are healthy, your premiums go towards others who are not and vice versa. Here’s the downside. Your medical bills are at the mercy of the group for assistance. You have to appeal to them to help pay your bills. My personal opinion on this is that most people participating in a plan like this are the sort of people who will be understanding and generous. There are no guarantees, but with a step of faith, this is one of your lowest cost options.
3. Affordable Care Act
Do you have a pre-existing condition? How about a low-income U.S resident? This could be your ticket. While I won’t get into my personal opinions on Obama’s policies, this is a way you can get healthcare at a lower cost without being declined. The Affordable Care Act doesn’t offer great coverage, but you will have basic protection and even some dental procedures are covered. If your income is too high to qualify for the ACA, try the other options via the healthcare marketplace.
4. Register your business
I think EVERY SINGLE FREELANCER needs to operate as an LLC. Not only are protecting yourself, your family and your assets from being sued, there are a TON of other benefits as well. One of which is healthcare through your business. If you are legitimately registered in your state, consider the Small Business Health Options Program. Plans may be available in your state as well, so make sure you don’t overlook that.
Sometimes this can be more expensive than individual plans but rates are always changing so you may save by going this route. Put it on your calendar to re-evaluate your options every year due to income fluctuations and changes in regulations.
5. Chamber of Commerce
Your local Chamber of Commerce may offer members affordable group plans. Also, research your city’s professional groups. The small membership fee may be worth it to get access to better coverage at an affordable price. If this option is not available to you (don’t forget to call and ask, as sometimes these benefits are not posted online!), don’t worry, there are other places to check as well.
6. Freelancer’s Union
The Freelancer’s Union offers health insurance plans to individuals all across the U.S. Simply enter your zip code, fill out the form (you’re not applying when you do this, just giving them a way to narrow down your options) and see what plans are available.
7. Find a doctor that charges flat fees
If you have children or visit your physician frequently, this could be a viable choice. You pay a monthly fee (about $80 for some plans) and you get as many visits as allowed by that doctor. This option doesn’t include prescriptions, emergency visits or hospital stays, but might be worth having as part of an a la carte custom plan.
8. Private insurance with deductibles
This option can cost $2,000 or more for a family of four for a low deductible option. YIKES! But you may want to consider looking into a minimum plan that covers a major disaster for less. You’ll pay out of pocket for most routine exams. If you’re healthy and maintain a healthy lifestyle, this could be all you need. Fair warning – a $10-$20K deductible is not uncommon if you want a lower premium. If you’ve built up a sizeable savings account, this won’t be an issue, plus if you keep saving and put that money in an HSA (more on that next), paying $1000 and less is not unheard of.
9. Health Savings Accounts
If you go with a high deductible plan, pairing it with a tax-sheltered HSA is going to be your best bet. If you have one, you can pay non-covered medical expenses (from your plan) from your HSA.
What does this mean for you? Well, if you’re allowed to contribute up to $6K per year to your HSA, & you’re in the 20% tax bracket, that $6K comes off of your gross income, meaning you won’t be taxed on $1200. That doesn’t mean $1200 back in taxes, just that your tax bill will be lower.
How to choose the best plan for you and your family.
I suggest spending some time now and going over the pros and cons of each option. Combining several of these could provide you with well-rounded and affordable coverage.
Freelancers need to take these costs into consideration when deciding what to charge their clients. You may need to re-evaluate what you thought you’d work for. If you’ve been freelancing on the side and have established customers and are thinking about going full time, think about how to present a price increase to them. Start with your most loyal customers, the ones you’ve had the longest and are most pleased with your services. The new year is a great time to re-evaluate your prices anyway and if you’re a rockstar freelancer, this shouldn’t be much of an issue.
The biggest takeaway? Don’t be uninsured! Not only do you risk paying a tax penalty, you could be in debt FOREVER should an emergency arise. Don’t think it won’t happen to you. Take the necessary steps to protect yourself and your family.
