Getting health insurance as a freelancer can be expensive and overwhelming. Especially if you’re used to an employer taking care of it.
Still, figuring out your healthcare coverage is an important part of self-employed life.
Let’s go over why insurance is important, how much you can expect to spend on it, and what types of plans will meet your needs, so you can make the best choice.
Do you need freelancer health insurance?
Technically speaking, no. For self-employed people, whether or not to get health insurance coverage is an individual decision.
The federal government doesn’t require health insurance
As of 2019, the federal government no longer requires people to have health insurance. That means you won’t pay any penalties to the IRS for not having it.
Some states do require health insurance
These states and territories still have their own coverage mandates:
- New Jersey
- Rhode Island
- Washington, D.C.
In many of these states, like California, you will still be fined for not having insurance.
If you’re interested in a short history lesson, read on. Otherwise, skip ahead to learn more about why health insurance is still a good idea — even if it’s no longer mandatory.
How mandatory health insurance worked in the past
When the Affordable Care Act (ACA) — also known as Obamacare — passed in 2010, it became mandatory for most people to have health insurance.
Tax penalty for not having insurance
Back in the day, you’d end up with a tax penalty if you didn’t have health insurance. (There were some exemptions for low-income people and people experiencing hardships, including homelessness, bankruptcy, and domestic violence.)
Tax subsidies to make insurance cheaper
The tax penalty sounds harsh. But the ACA also introduced tax subsidies to make insurance more affordable. It also opened up Medicaid eligibility to include more low-income people and families.
While the rules of the ACA have changed, it still exists. And it still plays a role in helping people get insurance. More on that shortly!
Should you get health insurance if you’re a freelancer?
Probably. Health insurance might not be required anymore for independent contractors, but it’s still a good idea to have it.
Choosing to get health coverage goes beyond your legal obligations. It’s about protecting yourself.
Here are a couple of situations where insurance would be helpful:
If you have a medical emergency
Say you’re in an accident or come down with a sudden medical condition. Your health insurance policy might be the only thing cushioning the blow of some overwhelming medical bills.
Emergency care tends to be expensive. The average ER visit cost $2,200 in 2019, according to United Health.
If you can’t work for a while
Hospital bills aren’t the only expenses you have to deal with if you get sick. If your recovery takes a while, you might have to temporarily stop working — forcing you to dip into your savings.
Without your self-employment income, even normal expenses like your rent and your 1099 tax bill might be hard to keep up with. Piling emergency medical expenses on top of that could be crushing.
At the end of the day, insurance is there to help combat the risks of the unknown. Ideally, you’re paying for something you’ll never have to use.
If you do find yourself dealing with a medical emergency, you’ll be glad you have coverage to fall back on.
How much does freelancer health insurance cost?
Without an employer-sponsored healthcare plan, you can likely expect to pay around $300-500 for health insurance every month.
The actual cost of health insurance can vary, based on factors including:
- Your age
- Your location
- Your health history
- The type of work you do
- What kind of coverage you’re getting
Your coverage options might affect how much you pay. Your costs might be lower if you’re getting group health coverage — say, through a family member or professional association — versus paying for your own health insurance.
Here are the typical ranges you can expect.
Average insurance costs in the Marketplace
The Health Insurance Marketplace is where people without employer-sponsored health plans can shop for affordable health insurance plans. It was set up as part of the Affordable Care Act.
Some states have their own individual Marketplaces, but there’s also a federal version. Here, you can browse for health insurance plans at a variety of tiers.
According to the Kaiser Family Foundation, here’s how much the average lowest-cost Marketplace plans cost:
- Lowest-cost bronze premium: $333.8/month
- Lowest-cost silver premium: $443.2/month
- Lowest-cost gold premium: $497.4/month
(These are the average prices over the last five years, from 2018-2022.)
On the other hand, the average cost of spending the day in a hospital is currently $2,607 — or $9,300 if you stay overnight.
How to pay less for Marketplace insurance with the advanced premium tax credit
If you buy health insurance through the Marketplace, you might be able to lower the cost using the premium tax credit (PT).
What is the premium tax credit?
The premium tax credit (PTC) helps eligible individuals and families pay for their health insurance. You get the money when you file taxes.
What is the advanced premium tax credit?
Instead of waiting till you file taxes to claim it, you can opt for the advance premium tax credit (APTC). You apply for this when you enroll in Marketplace insurance.
The amount you qualify for depends on your income and family size.
Here’s how it works:
- You fill out your information when you enroll
- The Marketplace determines how much of a credit you’re eligible for
- The Marketplace makes payments to your insurance company on your behalf
- Your insurance company lowers your monthly fees in response
What happens if your estimated APTC amount needs to be changed?
The APTC amount you originally qualify for is an estimate. It’s based on the information you enter when you first enroll in Marketplace insurance. But by tax time, things might have changed — including your income or household size.
Here’s what happens if your APTC amount needs to be adjusted.
If your APTC amount was too high
If the IRS determines that your APTC was too large, you’ll have to pay a portion of the credit back when you file your taxes.
If your APTC amount was too low
On the other hand, if you end up being eligible for a bigger credit, you’ll get that extra money back in a refund.
The APTC isn’t the only tax break freelancers get for buying health insurance. Let’s talk about the other major one next.
Can you write off health insurance if you're self-employed?
Yes — freelancers, small business owners, and other self-employed workers are the only people who can take a tax break for their health insurance.
We have a full article about the self-employed health insurance deduction. Check it out for more information, including a detailed guide on how to claim it.
In the meantime, here’s a quick rundown of this tax deduction.
How paying for freelancer health insurance can help lower your taxes
You use the cost of your health insurance plan to lower your income taxes. (In simple terms, you adjust your income down — putting you in a lower tax bracket and reducing the amount of income tax you pay.)
Your health insurance deduction vs. your business write-offs
Most business write-offs work differently than your health insurance deduction. These expenses — like your home office, computer, and business meals — reduce the amount of self-employment tax you pay as well.
Your health insurance won’t affect your self-employment tax — just your income tax. That’s because self-employed health insurance is treated as an “adjustment” to taxable income, rather than a business write-off.
To claim it, you’ll use Schedule 1 of your 1040 tax return. List your annual self-employment health insurance premiums under Part 2, line 17 of this form.
To stay on top of all your business expenses, consider downloading Keeper. This expense-tracking app scans your purchases for qualified write-offs, so you’ll never miss an opportunity to save.
When tax time rolls around, you can file directly in the app. It’ll even deduct the cost of your health insurance for you.
What are your freelancer health insurance options?
There are a variety of different health insurance plans, built to meet the needs of various types of freelancers.
Let’s break down the basics of the six most common health insurance options for self-employed workers, so you can find affordable health insurance.
Best if: You want to browse a bunch of different options before you decide on a plan
Like we’ve mentioned, the ACA Marketplace allows people to:
- See what kinds of healthcare plans are available to them
- Compare plans
- Ultimately make a purchase
When to enroll in Marketplace insurance
The Marketplace has one annual enrollment period, which generally begins at the beginning of November and ends by mid-January. You can view the exact dates here.
If you miss the enrollment period, you might still be able to apply for coverage during the “Special Enrollment Period.” These extended enrollment periods usually last for two months after a significant life event, such as:
- Losing a job (and your employer-sponsored health insurance)
- Moving to a new state
- Household changes like marriage, birth, adoption, or the death of a family member
2. Freelancers Union
Best if: You’re a freelancer who wants to join a group plan instead of dealing with insurance independently
The Freelancers Union is an organization that represents the interests of independent workers. It also provides health insurance plans specifically for freelancers.
When to enroll in Freelancers Union insurance
Freelancers Union only has one enrollment period per year: November 1 to January 15.
However — as with Marketplace plans — if you’ve recently experienced a major life event, you can apply outside of the enrollment period.
3. Professional associations
Best if: You want to join a group plan that’s specific to your industry
Professional associations or business groups specific to your industry may have their own group insurance plans, which you can join.
Here are some examples:
- For actors: Screen Actors Guild
- For graphic artists: Graphic Artists Guild
- For writers: Writers Guild of America
- For publishing professionals: Independent Book Publishers Association
- For computing professionals: Association for Computing Machinery
If there's a strong professional organization in your industry, this can be a good option.
Paying professional membership dues to get access to a group plan
Keep in mind: You may have to pay association membership fees in order to be eligible for a group plan. The good news is, you can write off professional dues like these.
Professional associations may charge one or both of these:
- A one-time initiation fee of around $1,000-$3,000
- Additional annual dues
Annual dues may be a flat fee (usually $100-$300) or a percentage of your earnings (usually 1-2%).
4. Family coverage
Best if: Your close family member has health insurance that can be extended to cover you
Sometimes, you can get coverage through your spouse’s healthcare plan — or another close family member’s coverage.
Some employer-based plans allow people to include their:
- Domestic partner
- Child or dependent, if they’re under 26 years old
If you qualify, going on a spouse's plan will be a cheaper option. That's because their employer will be subsidizing it.
Best if: You need financial assistance to help pay for health insurance
Medicaid is a public health insurance program that helps people with low incomes pay for health care. While the program is federally sponsored, each state has its own Medicaid rules and eligibility requirements.
How Medicaid eligibility works
Medicaid eligibility varies between states that have expanded coverage and those that don’t:
- Expanded eligibility: To be eligible, your income has to be below 138% of the federal poverty line — equal to $18,754.20 for a single-person household in 2022
- Unexpanded eligibility: To be eligible, your income has to be below 41% of the federal poverty line — equal to $5,571.90 for a single-person household in 2022
Under the Affordable Care Act, most states have expanded Medicaid eligibility — 39 of them, to be exact.
The 12 states that don’t have expanded eligibility are:
- North Carolina
- South Carolina
- South Dakota
Note: Medicaid is different from Medicare, a program that helps elderly and disabled people access health care.
Best if: You’ve recently left your job and want temporary coverage
The Consolidated Omnibus Budget Reconciliation Act — or COBRA (thank goodness for acronyms!) — lets former employees keep their workplace health insurance plan for 36 months after they leave or are let go from their job.
How COBRA plans work
Your former company group plan is turned into an individual plan that you pay for independently.
COBRA is generally considered a stopgap plan that people turn to when in a transition period — whether they’re in between jobs or transitioning from full-time work to freelancing.
These plans tend to be fairly expensive. After all, you’re going from an employer subsidizing your plan to paying the full price on your own. In addition to the cost of your plan, you’ll need to pay a 2% administrative fee.
7. Short-term health insurance
Best if: You want temporary coverage while you look for a longer-term plan
You might consider a short-term or temporary health insurance policy if you:
- Are between plans
- Missed an open enrollment period
- No longer qualify for family coverage
What to watch out for with short-term plans
Short-term plans aren’t usually very extensive. They also don’t have to comply with ACA regulations. For example, they:
- ✘ Don’t have cover preexisting conditions
- ✘ Don’t have to offer the same ten essential health benefits as ACA plans,
You should read the fine print for any short-term plan you’re considering.
We hope this guide provides you with information that will help you on the path of least resistance to the right medical coverage for you.
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