When employers offer health insurance as a benefit, the employer may pay over 80% of the cost. If you’re self-employed, the entire cost of health insurance coverage is yours. Fortunately, there are some effective ways to make health insurance more affordable — but there are some important considerations as well.
Quick Look: The Best Self-Employed Health Insurance Companies
- UnitedHealthCare – Get Quotes
- Kaiser Permanente– Get Quotes
- Blue Cross Blue Shield – Get Quotes
- Cigna – Get Quotes
- Humana – Get Quotes
- Aetna – Get Quotes
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Insurance Companies with Self-Employed Policies
What Should I Know About Self-Employed Health Insurance?
The Affordable Care Act changed the health insurance landscape, introduced additional requirements for insurers and mandated coverage for consumers. The federal coverage mandate is no longer in place for consumers but some states, like New Jersey, have enacted state-level mandates for residents.
Even where not mandatory, health insurance can provide a safety net for you and your family. Often, it’s best to view insurance as coverage for the big expenses — the type of expenses that can change your lifestyle or leave you burdened with medical bills for years.
Like other types of insurance, health insurance has its own lingo, industry terms that affect how your coverage applies and which expenses are paid out-of-pocket. Become familiar with the most common terms because they can have a dramatic effect on your overall health insurance costs.
What Affects Health Insurance Costs?
Unlike other types of insurance, like home or auto insurance, where literally hundreds of factors can affect your rates, health insurance uses a limited number of individual rating factors that can affect your premiums.
- Age: Expect to pay more for your health insurance as you get older.
- Location: State rules and localized cost of services can affect your premiums.
- Tobacco use: Insurers can charge up to 50% more for tobacco users. However, some states prohibit the practice or limit the additional premium based on tobacco use.
- Individual vs. family: Plans that extend coverage to family members cost more than plans limited to individuals.
Additionally, plan features, such as the structure of the deductible or out-of-pocket limits, affect the cost of premiums as well.
Before You Sign Up, Explore These Options
You may find a plan through your industry, the marketplace, or other types of health insurance plans.
The Marketplace (Healthcare.gov)
When searching for the best self-employed health insurance, you may want to explore the Marketplace. Launched as part of the Affordable Care Act’s initiatives, the Marketplace serves as a health insurance exchange where consumers can find many — but not all — health insurance options available in their area.
The Marketplace, accessible at Healthcare.gov, lists ACA compliant health insurance plans for all but eleven states, each of which has their own health insurance exchanges. Washington, D.C. also has its own independent exchange.
You’ll find plans sorted by metals monikers, with bronze, silver, gold, and platinum plans, and higher-level plans provide a greater level of coverage overall. Depending on your income, you may also qualify for subsidies that can lower the cost of coverage. However, subsidies aren’t available for bronze plans.
If your income is within 138% of the poverty level, you’ll likely qualify for Medicaid and the Marketplace will guide you toward the correct resources for your state.
The Marketplace isn’t the only way to buy health insurance, but it has become a centralized exchange with many insurers that list most of their full-coverage plans on the Marketplace or other state exchanges.
Be aware that health insurance plans available through the Marketplace are only available during a short time frame during open enrollment unless you qualify for a special enrollment period. In most areas, if open enrollment has ended, the Marketplace will display options for short-term health insurance coverage, which may have some coverage limitations and different eligibility requirements.
The Marketplace and state exchanges welcome self-employed individuals, including freelancers, independent contractors, consultants and others who don’t have employees. If you do have employees, the SHOP Marketplace provides health insurance options for small businesses.
Association Health Plans
Depending on your industry, you may find some additional resources with an industry guild or association. While most associations require an annual fee for membership, your membership can offer several benefits and can possibly include access to association health insurance plans. These are group insurance plans, not unlike the plans purchased by employers for their employees. Typically, group insurance plans have lower negotiated rates.
The Affordable Care Act introduced new requirements that forced many associations to discontinue their health insurance offerings or to move toward supplemental plans. Previously, many association health plans aligned their plans with the requirements for a particular state as opposed to federal guidelines.
ACA requirements that made certain coverages mandatory effectively reduced the number of choices for association plans — but some are still out there. Investigate association options and evaluate membership as a total package to measure its value relative to your needs.
Associations might be industry-specific or they may be more general in scope. Listed below are a few for associations for consideration:
Similarly, Professional Employer Organizations (PEOs) can be another source for group health insurance if you have employees. PEOs are companies that provide outsourced business management services, like HR and payroll processing. Many of these providers also offer (and administer) group health plans.
Health Savings Account (HSA) to Reduce Premiums
A health savings account provides a tax-advantaged way to save for healthcare expenses. You have to select a high-deductible health insurance plan that qualifies for use with an HSA. Currently, plans with a $1,350 individual deductible or a $2,700 family deductible qualify for an HSA.
With your HSA, you can put aside tax-free money in an interest-bearing account to be used for qualified health care expenses, including expenses not covered by most health insurance plans, like dental and vision care. Unused health saving account balances can continue to build if not needed in a given year. With a traditional health insurance plan, you may pay for coverage you don’t need if your health insurance needs are minimal.
For many healthy households, an HSA combined with a high-deductible health insurance plan provides a more efficient way to pay for health care needs and reduce premiums.
Health Care Indemnity Plans
Also called fee-for-service plans, healthcare indemnity plans work differently than traditional health insurance plans. Instead of the usual health insurance structure that may limit physician choice or has difficult-to-understand exclusions, a healthcare indemnity plan is a simpler solution that provides greater freedom — but that freedom comes at a price.
With a healthcare indemnity plan, you’ll pay a fixed percentage for most services and 100% for services that aren’t covered by the plan.
An indemnity plan requires that you pay your medical service provider directly. The plan then reimburses you a fixed amount based on the type of qualified service you’ve had performed. In effect, there is no out-of-pocket limit with an indemnity plan, which is why these plans are often used to supplement existing health insurance plans. Be aware that a healthcare indemnity plan is not ACA-compliant which can be a factor in certain states, like New Jersey, which have state-level health insurance mandates.
What to Look for in a Self-Employed Health Insurance Plan
Each household has its own priorities. Some households may place physician choice above monthly cost. Other households might prioritize monthly affordability over occasional expenses, like higher copays or coinsurance.
While your priorities may differ from those of your neighbor, be aware of the potential costs when choosing a health insurance provider. The monthly premium for your health insurance only tells part of the story. In a year in which your health care needs are higher, your cost can skyrocket if you choose a plan that has lower premiums but which has higher deductibles, co-pays, coinsurance, or a higher maximum out-of-pocket limit.
You’ll find most of your options are from long-established and well-known health insurance providers. However, some plans or providers may offer options that are more advantageous for your household.
Best Self-Employed Health Insurance Providers
As the largest health insurance provider in the U.S., UnitedHealthCare offers a range of plans including ACA-compliant plans, indemnity coverage and high-deductible health insurance plans that qualify for a tax-saving health savings account.
While not always the least expensive option, UnitedHealth offers a wide choice of providers and a suite of customer service tools to manage everything from your account to your prescriptions — online or on the go.
You’ll find health insurance availability to often be regional, and Kaiser Permanente is no exception. While limited to just eight states and Washington, D.C., this insurer is known for affordable rates and a wide selection of options — if you live where they offer plans. If you’re a little older but not quite ready for Medicare, you may also find a price advantage with Kaiser Permanente.
Blue Cross Blue Shield (BCBS)
An American icon, Blue Cross Blue Shield is a time-tested insurer made up of dozens of regional companies that span the U.S. Plan availability varies based on location, which is common in the health insurance industry, but may be more pronounced with BCBS and its federation of health insurance companies. Customers can expect a wide network of healthcare providers and a strong assortment of plans in most areas.
Cigna, a popular choice with employers for group health insurance plans, also offers individual plans in 12 states throughout the U.S. Dental plans are also available over a wider geographic territory. Cigna customers can expect an expansive network of doctors and a practical assortment of health insurance plans, including high-deductible plans that qualify for health savings accounts. Cigna does not offer short-term health insurance plans.
Available in twenty-two states, Humana is not only widely accessible but also one of the more affordable options in many cases. In some states, Humana can bundle dental and vision coverage with your health insurance coverage, providing an all-in-one solution that’s increasingly rare in the health insurance industry. Like Cigna, Humana does not offer short-term plans but if your needs are longer-term, this insurer deserves a closer look.
Offering plans both privately and through the health marketplace exchanges, Aetna offers a broad range of health care plans, including dental and vision plans and even travel insurance. Aetna’s indemnity plans provide an affordable way to reduce costs for many common health services. Health insurance costs vary by age and location, but consumers who are price conscious can expect Aetna’s health insurance plans to be more affordable than some other options.
Health insurance premiums for self-employed individuals became 100% tax deductible in 2003 in many cases. This deduction reduces your taxable income by the amount of money you pay for health insurance premiums in the tax year. Tax rules and qualifications can change, so be sure to check current guidelines each year before taking the deduction on your 1040.
If you’re newly self-employed and still building your income, a subsidized marketplace plan may be the best solution in the short-term. However, if you have significant savings or are able to regularly fund a health savings account, a high-deductible health insurance plan may be a more cost-effective solution that also provides more freedom.