Historically it’s been the case that the self-employed are also the ones paying the most for health insurance. This might not be so bad in the short term, especially when you’re just starting your business and money is tight, but in the long run life’s calamities usually find a way to catch up to you.
So where do you start?
For many, the first stop is to an online health insurance brokerage that sells health insurance plans from the major carriers. Usually their websites function a lot like a health insurance version of Travelocity, where you can search generally or specifically for health insurance plans then compare them against one another to see how they match up.
In fact the concept is very similar to the planned health insurance marketplaces that will be coming as a result of the Affordable Care Act (ACA), or Obamacare, as it’s more commonly referred to as. More on that later.
But what other options do you have if you’re not looking to spend a whole lot of money on a private individual insurance plan?
Joining your spouse’s health plan
If your husband or wife has a job with great benefits, this should really be your first option. Being added onto their plan is going to be much cheaper than getting a whole new one on the open market.
If you’ve just recently been laid off or left a job with health insurance, then COBRA is an option for you. The program lets you stay on your old job’s health insurance plan for up to 18 months as long as you take over full responsibility for paying the monthly premium.
Medicaid, if you’re not familiar, is government sponsored insurance for those who cannot afford private market insurance and who meet the requirements of the program. Usually there is a maximum annual income level that’s measured using your income against that year’s definition of the federal poverty line (FPL).
Insurance through a professional group
Groups and unions like the freelancer’s union or your local chamber of commerce can also be options for getting health insurance. Depending on your work you can also look up bar and trade associations in your area to see if they offer their members health insurance.
The Affordable Care Act
The ACA considers all self-employed workers to be individuals for the purpose of health insurance. That means you’ll have to comply with the individual mandate to have health insurance or pay a penalty. Next year that penalty will only be $95, but it will increase every year according to the rate of inflation.
If you make between 100 percent and 400 percent of the FPL then the maximum you’ll have to pay for your health insurance is 9.5 percent of your annual income. The less you make the lower that percentage will be. Any gap between your maximum contribution and the actual cost of the health insurance plan will be made by a tax credit.
The ACA will also expands the Medicaid program in those states that want it. So far 26 have either said they will expand Medicaid or they’re leaning toward expanding it. In those states that are expanding the program, the income eligibility for Medicaid increases to 133 percent of the FPL and single childless adults will be able to apply for the first time.
Michael Cahill is the Editor of the Vista Health Solutions Blog. He writes about the health care system, health insurance industry and the Affordable Care Act. For more information about the ACA may affect small business owners, visit the Vista Health Solutions self employed health insurance guide. Follow him on Twitter at @VistaHealth