6 Tips to Find Affordable Health Insurance When You Become Self-Employed

Becoming self-employed or leaving a job for any reason doesn’t mean you can’t get affordable health insurance. Laura covers six tips to find a health plan so you and your family get the coverage you need no matter your employment situation.

By

Laura Adams, MBA
November 4, 2020

Tax Cuts and Jobs Act, the mandate penalty for not having health insurance no longer applies. Technically, it’s still illegal to be uninsured, but the federal government won’t penalize you for it. 

But several states have their own insurance mandates, requiring you to have a qualifying health plan. You may have to pay the penalty for being uninsured if you live in:

  • California
  • District of Columbia
  • Massachusetts
  • New Jersey
  • Rhode Island
  • Vermont

For example, California residents without ACA coverage in 2020 face a penalty up to 2.5% of household income, or $696 per adult, and $375.50 per child, whichever is greater. So, even if the federal government won’t penalize you for being uninsured, you could have to pay a hefty state penalty, depending on where you live. More states will likely adopt penalties to keep the cost of coverage for residents as low as possible.

The ACA established health insurance exchanges, primarily as online marketplaces, administered by either federal or state governments. That’s where individuals, the self-employed, and small businesses can shop and purchase qualified insurance plans and find other options, depending on your income.

How to get affordable health insurance

When you go out on your own, the cost of a health plan can be shocking—especially if you just left a company that paid a big chunk of the insurance bill on your behalf.

Remember that the high cost of health insurance pales when compared to the alternative. Having a medical emergency or being diagnosed with a severe illness that you can’t afford to treat could be devastating. 

Remember that the high cost of health insurance pales when compared to the alternative.

Here are six tips for finding affordable health insurance when you become self-employed or no longer have job-based coverage for any reason:

1. Join a spouse or partner’s plan

If your spouse or partner has employer-sponsored health insurance, joining their plan could be your most affordable option. Group insurance generally costs much less than individual coverage. Plus, some employers subsidize a portion of your premium as a benefit. 

However, some employer plans may not offer domestic partner benefits to unmarried couples. So, find out from the benefits administrator what’s allowed. 

If you’re under age 26, another option is to join or remain on a parent’s health plan if they’re willing to have you. Even if you’re married, not living with your parents, and not financially dependent on them, the ACA allows you to get health insurance using a parent’s plan. However, once you’re over age 26, you’ll have to use another option covered here.

2. Enroll in a federal or state marketplace plan

As I mentioned, the ACA established federal and state marketplaces for consumers who don’t have access to employer-sponsored health insurance. The following states have health insurance exchanges:

  • California
  • Colorado 
  • Connecticut 
  • District of Columbia
  • Idaho 
  • Maryland 
  • Massachusetts
  • Minnesota
  • Nevada
  • New York 
  • Rhode Island
  • Vermont
  • Washington

No matter where you live, you can begin shopping for an ACA-qualified health plan at healthcare.gov. However, you can only apply for a policy during the annual open enrollment period—November 1 to December 15, for coverage that will begin on January 1 of the following year. Some states with healthcare exchanges have an extended enrollment period

In general, if you miss the enrollment window, you can’t get an ACA health plan until the following year unless you qualify for a special enrollment. That allows you to purchase or change coverage any time of the year if you have a major qualifying life event, such as losing insurance at work, getting married or divorced, having a child, or relocating. However, you typically only have 60 days after the event occurs to enroll.

If your income is too high to qualify for a healthcare subsidy, you can still buy health insurance through the federal or your state’s exchange. You can also get an ACA-qualified health plan directly from an insurance company, a health insurance agent or broker, or an online insurance aggregator.

3. Consider a high-deductible health plan (HDHP)

One way to reduce the cost of health insurance premiums is to choose a high-deductible health plan (HDHP). You enjoy lower monthly premiums but have higher out-of-pocket costs. If you’re in relatively good health, an HDHP can make sense; however, if you get sick, it can end up costing you more. 

Paying for a broad range of HSA-eligible medical, dental, mental, and vision costs on a tax-free basis can add up to massive savings!

Another benefit of having an HDHP is that you qualify for a health savings account (HSA). Contributions to an HSA are tax-deductible and can be withdrawn at any time to pay for qualified medical expenses, such as doctor co-pays, prescription drugs, dental care, chiropractic, prescription eyeglasses, and mental health care. 

Paying for a broad range of HSA-eligible medical, dental, mental, and vision costs on a tax-free basis can add up to massive savings!

4. Get a short-term plan

If you miss the deadline to enroll in an ACA health plan and don’t qualify for special enrollment, are you simply out of luck? Fortunately, no. You can purchase a short-term health plan until the next enrollment period comes around.

The problem is, short-term plans don’t have to meet ACA standards and only offer temporary coverage, such as for a few months or up to a year. You may be eligible to renew a plan for up to three years in some states, depending on the insurer. 

You won’t find short-term plans on the federal or state exchange, and therefore can’t get a subsidy when you purchase one. However, they can be less expensive than an ACA-qualified plan.

Short-term plans can charge more if you have preexisting conditions, put caps on benefits, or not cover essential services like prescriptions and preventive care. Because they fall short of ACA requirements, you can have one and still be subject to a state-mandated health penalty. 

You won’t find short-term plans on the federal or state exchange, and therefore can’t get a subsidy when you purchase one. However, they can be less expensive than an ACA-qualified plan. 

Having short-term coverage is certainly better than being uninsured, but I recommend replacing it with qualified health coverage as soon as possible. That’s the best way to have the protection you need against the enormous financial risk of medical costs. 

5. Enroll in Medicaid and CHIP (Children’s Health Insurance Program)

If you can’t afford health insurance, you may be eligible for free or low-cost coverage through Medicaid or CHIP at any time of year, depending on your income, family size, and the state where you live. In general, if you earn less than the poverty level, which is currently $12,760 for an individual or $26,200 for a family of four, you may qualify for these programs. They may have different names depending on where you live. 

Unlike ACA health plans, state-run health programs don’t have set open enrollment periods, so if you qualify, coverage can begin any time of year. 

When you complete an application at the federal or state health insurance exchange, you can also determine if you qualify for coverage through Medicaid and CHIP programs. You can learn more about both programs at medicaid.gov

6. Get COBRA coverage

If you leave a job with group health insurance, you can enroll in COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage. It isn’t an insurance company or a health plan, but a regulation that gives you the option to continue your employer-sponsored health insurance after you’re no longer employed. 

Instead of having your plan canceled the month you leave a job, you can use COBRA to continue getting the same benefits and choices you had before you left the company. In most cases, you can get COBRA benefits for up to 18 months.

The problem with COBRA coverage is that it’s temporary and can be expensive. Unlike other federal benefits, such as the Family and Medical Leave Act (FMLA), employers don’t have to pay for COBRA. You typically have to pay the full cost of premiums, plus a 2 percent administrative charge, to the insurer. 

If you’re not eligible for regular, federal COBRA, many states offer similar programs, called Mini COBRA. To learn more, check with your state’s department of insurance.

Health insurance shopping tips

After you become self-employed and purchase health insurance, it’s crucial to shop for plans every open enrollment period. Your or your family’s medical needs or income may change.

Additionally, new health insurers come in and go out of the health insurance marketplace. Carriers that offered plans in your ZIP code last year may not be the same set of players this year. In other words, a competitor could offer a similar or better plan than yours, for a lower price. So, if you don’t shop annually, you could leave money on the table.


About the Author

Laura Adams, MBA

Source: quickanddirtytips.com