Self Employed? Here's What You Need to Know About Health Insurance
The freedom of self-employment is seductive, but the reality may not be as sexy. For those self-employed individuals like rideshare drivers or freelancers earning their income through the gig economy, health insurance can be a dirty word, right along with self-employment taxes.
However, being your own boss means some things come with the territory that you are now responsible for.
Understanding Your Health Insurance Options
As open enrollment for qualifying ACA plans begins (Nov 1-Dec 15), it’s essential for those that are self-employed to know what options they have when it comes to health insurance.
The rules surrounding health insurance has changed over the last couple of years. These changes allow those who are self-employed, such as freelancers and rideshare drivers, to secure the coverage they need at affordable prices.
The ACA essentially changed the way we shop for health insurance. It imposed a mandate that all Americans have qualifying health insurance or pay the penalty. While this mandate remains in effect for 2019, as of 2020 its out the door. However, numerous states have passed insurance mandates for their residents, including Massachusetts and New Jersey. So, even if the federal government no longer requires insurance, the state you live in might.
The Affordable Care Act mandates that every policy covers ten essential benefits, including prescription drugs, outpatient care, mental health services, emergency room care, hospitalization, rehabilitation, lab work, preventive care, vision and dental care for children, plus maternity and newborn care.
However, that doesn’t mean that everything is paid for. And there are other policies like short term policies that provide basic coverages.
Why Do I Need Health Insurance if I am Self-Employed?
Self-employed individuals need health insurance more than anyone else. Think about it, if you’re sick or injured and can’t get out of bed, who will drive your car or write those articles? No one.
And that means you don’t get paid. Plus, having a backup plan is hard. Almost half of the population couldn’t afford a $1000 emergency if it popped up.
And if you haven’t noticed lately, a trip to the ER is expensive. The good news is that health insurance can also save you on your taxes. Being self-employed, you know how important that is!
Tips for Shopping and Choosing a Healthcare Plan
Health insurance happens to be one of those things that you must put a little effort into when shopping coverages, especially if you are an independent contractor. Understanding what you are buying is crucial. For example, choosing a higher deductible (how much you pay out of pocket for services) may get you a lower monthly bill.
Still, it doesn’t do any good if you can’t afford your visits. When shopping around for health insurance, you need to understand your needs (and your family) and how the policy you are looking at will meet those needs. So, how do you do that? Well, you must do some reading and search for some key terms.
Types of Plans
So, this is where you see a string of letters that you probably have no idea what mean. But you need to, because they are very important when selecting the right plan.
- HDHP is a high-deductible health plan. These are also known as a catastrophic health plan. They typically have the lowest premiums but high out of pocket limits and deductibles. Often these work best with a health savings account or HSA.
- HMO is a Health maintenance organization. HMOs usually cover only services provided by an in-network provider and require referrals from a primary care physician to seek specialist care.
- EPO is an Exclusive provider organization. They are very similar to an HMO, but there is a national network of providers instead of only geographically.
- POS is a point of service plan. This a version of an HMO plan that allows some coverage for out-of-network doctors if you in-network primary care doctor provides a referral.
- PPO is a preferred provider organization. These plans have the most flexibility in terms of what is covered. But they come at a higher premium. The benefits are not needing a referral from a primary care doctor, and you can see any provider at any time. They also have an in-network set of doctors, but you can still see out of network providers.
Different plans work best for different situations. Be sure to consider how often you need healthcare or how often you may need it in the future. If you only need it for emergencies, an HDHP may work, but if you have any needs, you may ant to choose a PPO plan where you know what is covered and the costs upfront.
In-Network or Out? What's the Deal?
When evaluating your needs, the next decision is whether your plan requires you to choose doctors and specialists in their network. In-network doctors are contracted with insurance companies for lower rates. If you don’t use an in-network doctor, you will typically pay a higher portion of the cost. As you’re shopping for plans, most companies will have a provider search tool on their website. If sticking with the doctor you have is essential, be sure to check if they are in-network or that you are comfortable with the higher cost of care.
• In-network care- Care provided by a medical service provider that participates with your insurer. When a provider is in-network, they agree upon rates with your insurer. You can’t be charged more than those agreed-upon rates. Payment for a covered service from an in-network provider counts toward meeting your deductible.
• Out-of-network care- Care provided by a medical service provider that doesn’t participate with your insurer. They do not have negotiated rates with your insuer. They do not have negotiated rates with your insurer. Meaning they could charge more than your insurance company pays for a service. If the out-of-network provider charges more, it’s up to you to cover the remainder of the cost and only a portion of the payment may count toward your deductible.
Out of Pocket Costs
You’ll need to be familiar with a few insurance words when comparing out of pocket costs. They are deductible, copayments, and coinsurance.
- Deductible – This is the amount you pay out of pocket each year before the insurer kicks in for their part.
- Copayment – This is the money you pay for covered services. For example, if a $35 copay for office visits, then that is what you would pay for the appointment.
- Coinsurance – This the amount of medical bills you are responsible for paying. You may see it like 80/20 or 60/40, for instance. An 80/20 would mean that you pay 20% of the costs, and the insurance company would be 80%.
Any plan you are considering will include a summary of benefits. This is where you should find out how much you will pay out of pocket for services, known as your out of pocket maximum.
Where Can the Self-Employed Purchase Health Insurance?
There are a few options outside of employer-provided health insurance to those looking to secure coverage.
- The Affordable Care Act exchange: ACA or Obamacare aimed to streamline the process of buying health insurance by motivating each state to create a marketplace. Washington, D.C., California, Colorado, Connecticut, District of Columbia, Idaho, Maryland, Massachusetts, Minnesota, New York, Rhode Island, Vermont, and Washington. If you aren’t in one of these states, you’ll shop at Healthcare.gov. If you buy a policy on the ACA exchange, you may be eligible for subsidies. The caveat is that there might be a limited number of policies in your area.
- Buying off-exchange plans: It’s also possible to purchase insurance policies ACA exchanges by going to direct to insurers. When buying an off-exchange plan, policies that are ACA-compliant must meet specific requirements, including covering ten essential services, plus no lifetime limits (caps on the total amount the policy can pay over your lifetime). Non-compliant plans like short-term health insurance plans, which last only a limited time and don’t comply with Obamacare mandates, are also available. While these plans are less expensive, you also have less coverage.
- Seek professional help: A licensed independent insurance agent can be an excellent resource for individuals looking for healthcare coverage. Your state insurance department website can be a great tool to locate an agent in your area. Another option is to get a free insurance plan comparison with eHealth.
Wrapping it Up
The bottom line is choosing the right health insurance is critical to your success as an independent contractor. If you aren’t healthy, your business isn’t healthy, take care of yourself and it properly.
This article is for informational purposes only and RideshareGuru.com does not make any guarantees to its accuracy as each state’s insurance situation is unique. We recommend that you contact a licensed insurance agent for the most accurate information regarding your coverage.
Sarah Ware (CISR) holds licenses in Property and Casualty as well as Life and Health insurance and has worked in the insurance industry for over 10 years.