One of the scariest things about self-employment is trying to figure out what you will do for healthcare. Not having healthcare can result in incurring steep costs after a medical emergency. For a lot of people on lower or even middle incomes, that can mean going into debt for lifesaving treatments. But you may not know what health insurance options exist for self-employed people.
As with many other parts of self-employment, healthcare is just a little bit harder. Usually, if you work for an employer that offers healthcare, you pay very low monthly premiums because your employer covers part of the bill. Your employer also gets a significant discount for purchasing larger group plans rather than individual care.
If you’re paying for your own insurance, you’re responsible for the full cost of the premium. To add insult to injury, individual plans are usually more expensive for the same standard of care.
But if you are considering going full-time with your passion, hobby, or side-gig, there are some possible solutions for finding healthcare that fits your new lifestyle.
Individual Marketplace Insurance For Self-Employed People
For most self-employed people, your best bet is going to be the Affordable Care Act (ACA) marketplace. During open enrollment times, you will have the option to browse and purchase healthcare options.
We mentioned before that freelancers and other independent workers are on the hook for their entire insurance premium. The ACA allows you to view and compare options relative to your income to see which will be most affordable for you.
We won’t lie. It doesn’t look good. In 2019, health insurance premiums averaged $465 a month across the United States. The cost is even higher for family insurance. With many freelancers on a tight budget, this means that health insurance almost always becomes a hefty monthly cost right up there with your rent.
But as with rent and many other living expenses, these costs will vary wildly depending on where you live. It could be cheaper than that—it could also be a lot more.
Starting Out: COBRA Insurance for Self-Employed People
COBRA—Continuation of Health Coverage—allows you to continue your group health care coverage for a limited time following job loss. You will be footing the entire bill, including the portions that your employer previously paid for, but it will allow you to stay on your plan. COBRA benefits last between 18 and 36 months depending on how you leave your job.
Unlike many other unemployment options, COBRA kicks in whether you leave your job by choice or not. This potentially makes it a good option for people looking to go indie for the first time and are hoping to keep their current doctor for the transition.
Again, you will be paying the full price of your coverage for that time. But if you have the funds to cover that transition period, it can be a good option for moving from having an employer to being your own boss.
If you make under a certain amount and live in states with expanded Medicaid, it’s possible you could be eligible for state healthcare.
For example, if you live in Washington State, the cutoff for Apple health is $17,609 in income. Depending on what industry you’re in, that’s not an unbelievable amount of earnings for your first year of freelancing, independent contracting, or small business ownership.
However, it’s important to check the Medicaid cutoff in your state. Not all states accepted the federal offer to expand Medicaid. In those states, the cutoff could be as low as $8,905 a year.
Freelance, But Think First
No part of this article is intended to make the situation sound grim. But healthcare is a serious expense to consider when you’re thinking about going rogue from traditional employment. Often, it’s a factor that will help you determine whether freelancing is workable for you or not.
For instance, freelancing is often most feasible for people who have access to healthcare through another source. This could mean everything from being married to someone with coverage through their employer, living in a state with expanded Medicaid limits, or having freelancing stay your “side hustle” until you know for sure you can afford the financial burden on your own.
This is not to say that these are options for everyone. We understand these things are largely out of your control—no one expects you to go out and get married to someone with a corporate job or move to a different state just for healthcare. That would be absurd (and if it was that easy, everyone would do it). However, if you have the choice, it’s important to think about whether your circumstances are well-suited to self-employment. Healthcare and access to it are a big part of that.