Health Insurance Options for the Self-Employed
Full-time freelancers live a life of advantage: freedom from the traditional 9 to 5 workday, the ability to choose clients and set their own rates, and opportunity that isn’t defined by geography. The U.S. freelance workforce is growing three times faster than the overall workforce, according to Freelancing in America: 2017, a comprehensive study conducted by Upwork and Freelancers Union. In fact, 57.3 million workers currently freelance, and analysts predict that freelancing will make up the majority of employment by 2027.
For all the perks, there’s one thing that isn’t implied for the self-employed worker: health insurance.
Do I Really Need Health Insurance?
In a word, yes. While you may be healthy, insurance coverage is crucial for self-employed business owners, especially since you may not have enough savings to cover an illness or accident that leaves you unable to work (or pay the bills). Unless you qualify for an exemption under the Affordable Care Act (ACA), you’ll also pay a penalty if you don’t have health insurance for at least 9 months of the year. This penalty amounts to 2.5 percent of your adjusted gross income, which would likely overshadow the costs of insurance premiums, not to mention the risk of expensive medical bills.
If you’re considering a shift into freelancing, review these health insurance options for self-employed professionals.
The Small Business Health Options Program (SHOP)
The ACA has been good for small businesses: 1.4 million small business owners or self-employed consumers bought coverage through the marketplace in 2014, according to a U.S. Department of Treasury analysis released in 2017. Self-employed workers qualify for healthcare enrollment under the ACA’s SHOP in two ways:
- If you have an existing insurance policy, you may choose a SHOP plan, contact your provider, enroll, and pay your premiums through their company.
- If you need an insurance broker, you can find a local an authorized SHOP professional through this tool and purchase coverage with their assistance.
The Healthcare.gov website allows you to choose a plan based on your desired level of coverage, deductible amount, and qualifying exemptions.
National Association for the Self-Employed (NASE)
NASE is a non-profit organization that provides resources, support, and connections for small businesses in the U.S. Members get access to discounts on essentials like shipping, tax preparation software, payroll services, and, among other things—health insurance. Through US Health Group, MetLife Assurant, Golden Rule, and other providers, NASE offers small business insurance coverage for medical, dental, life, disability and accidents, all customizable depending on your business structure and individual needs.
Their website provides a form to help you begin the process of requesting a quote and build the right plan.
Freelancers Union is a free-membership community that supports independent workers through an online community, advocacy studies, and freelancing resources. They launched the Freelancers Insurance Company in 2008, the first portable benefits model for freelancers. In 2014, they launched the National Benefits Platform, which provides nationwide access to benefits including dental, liability, life, and disability insurance, and retirement plans as well. Their online step-by-step questionnaire helps self-employed workers narrow their search for coverage by type and state of residence in order to find a plan that suits your business and professional stage.
For example, suppose you’re based in Chicago, new to freelancing, and have recently lost health care coverage. After completing a contact form, Freelancers Union will send you a list of state-specific insurance options with rates based on the type of coverage you need.
Don’t Forget: Self-Employment Tax Deductions
Whether you choose ACA coverage or another health care plan, most self-employed business owners qualify for tax breaks for medical, dental, and long-term care insurance for themselves and their dependents based on a few factors:
- Your tax deduction cannot exceed the income you earn from your business in the tax year.
- You can claim health insurance premium write-offs on a month-to-month basis as long as you or your spouse are not eligible to participate in an employer-subsidized healthcare plan during that time.
- If you are a self-employed partner or member of an LLC, you can claim tax deductions as long as you pay your own healthcare premiums.