Being self-employed comes with the freedom to escape a 9 to 5 routine and create a career to your own standards; however, the subject of health insurance for the self-employed is often enough to make anyone squirm.
Here are a few things you can expect if you are self-employed and in need of health insurance.
1. You May Face a Fine
If you are self-employed, and can afford basic health insurance but choose not to buy it, you will have to pay a penalty for being uninsured.You must have qualifying health coverage that meets the minimum essential coverage requirement.
2. Deductions and Assistance are Possible
The IRS offers a tax deduction for self-employed individuals and their families regarding medical, dental or long-term care insurance premiums. However, you are not eligible for deductions on your health coverage premiums if you were eligible for a group plan through your spouse’s employer. Additionally, self-employed individuals may itemize medical deductions which can allow you to deduct most health care costs that exceed 10% of your adjusted gross income.
As well as a few deductions, cost assistance is available to some. Through the Affordable Care Act, self-employed individuals can qualify for cost assistance including Premium Tax Credits, Cost Sharing Reduction Subsidies, Medicaid, and CHIP, all of which are based on household income.
3. Shopping at HealthCare.gov
Most individuals choose to shop for self-employed health insurance at the HeathCare.gov Marketplace. Here, you’ll find several options at varying prices to fit your insurance needs.
Keep in mind that self-employed individuals can only enroll in new plans or switch existing plans during open enrollment periods, which are typically during November and December each year. If you do not make the open enrollment period, you will either face limited options or suffer paying the penalty fee for being uninsured.
4. Other Options
Health insurance can be expensive for the self-employed, so it pays to know your options. Here are some to look into:
- A healthcare sharing ministry. Individuals (typical of similar beliefs and values) make monthly payments to a pool of money available to all members for medical purposes.
- Health savings account (HSA) accompanied by a high-deductible health insurance plan. This means the self-employed individual would have to pay more money should there be a medical incident, due to the high deductible, but will have a HSA set aside with tax-preferred treatment to pay the deductible along with a lower monthly payment to the insurance company.
- Health insurance through a professional organization. Rather than getting insurance through an employer, a self-employed individual can get insurance through a professional organization where members pool money for health coverage. Examples of these include the National Association for the Self Employed and Writers Guild of America.
Self-employed health coverage can be overwhelming, especially for those just beginning the journey. Learn more about your options here.