How to Find Affordable Health Insurance for Freelancers
$426.56/month for health insurance. I couldn’t believe what I was seeing.
I was only paying less than $100/month at the time.
Sorry about that, you caught me in mid-thought. Let me bring you up to speed:
To continue my health coverage after I leave my job and become a freelancer, I would have to pay more than 4 times what I was paying as an employee.
Well, this is annoying.
Health Insurance is Your Second Largest Fixed Expense
Behind your rent, health insurance is your biggest monthly expense. As a freelancer, you know how important it is to keep costs low.
In this post, I show you how I transitioned from having company-sponsored insurance to having personal insurance. I’ll teach you:
- How to take advantage of your company-sponsored insurance before you leave your job.
- How to find affordable health insurance to make sure you’re covered
Health insurance is something you don’t want to get wrong. Having expensive health insurance can put a strain on your business. But not having health insurance could cripple your business and endanger your life.
So That’s What They Mean By Benefits…
If you’re anything like me, you must have found the first HR meeting of your first job confusing as hell. The reason? Health insurance.
HR will take you through huge tables comparing different insurance packages your company offers. You will also see strange terms like these for the first time in your life:
- Copay: A fixed dollar amount that you pay out of pocket for a medical expense.
- Premium: What you pay each month in order to purchase insurance. This is, roughly, the “cost” of your plan.
- Coinsurance: The percentage of a medical expense that you are responsible for paying. The insurance company pays for the rest, hence “co-insurance.”
- Deductible: The amount you are responsible for paying towards medical expenses before your insurance coverage “kicks in” to pay the rest. This resets every year.
- Maximum out-of-pocket: The maximum amount you will be responsible for paying toward medical expenses covered on your plan.
Here are the photos I took from my first job. We were handed these insurance packets on my first day. *Full Disclosure: I sent these pictures to my parents because I was confused and needed help. Sigh.
Through your company-sponsored group health plan, you get the following benefits:
- Your monthly fees automatically deduct from your paycheck, pretax and all.
- Your health insurance is cheaper because you get group prices
- Depending on your employer, your company may subsidize your plan
You spend your first few days at work picking between the insurance packages your company offers. Then afterward, you’re all set and never have to think about these again.
That was the case for me too! Well… until I decided to quit my job.
Not Thinking About Health Insurance | Having to Think About It
Maintaining Your Existing Health Insurance with COBRA
Make no mistake about it. When you quit your job, you are committed to losing your existing health insurance.
However, there is an option to extend your existing company insurance plan thanks to COBRA: Consolidated Omnibus Budget Reconciliation Act.
If your company offers COBRA coverage, you may be able to get continuing coverage for up to 3 months. Although this will be at a higher rate what you pay as an employee.
When I decided to leave my job, the first thing I checked was if my company offered COBRA coverage. They did, but it was 4 times more expensive than what I was paying at the time.
This is because of two reasons:
- My company no longer subsidized my insurance.
- I no longer got the group rate.
As a result, I had to cover the full cost of my health plan.
This wouldn’t do. So I looked elsewhere.
Individual Plans are Much More Expensive
Before we get into the search process, here’s what you need to know: individual insurance plans are much more expensive than group insurance plans.
As I shared above, to stay on the same health insurance plan I had at my full-time job, I would have had to pay around $400/month. I couldn’t afford that.
Budding freelancers need to spend as little as you can get away with. This means that in an ideal world, you would go for the cheapest plans, which are priced at around $160/month.
This could save you up to $3,000 a year.
These are plans with high deductibles that only cover preventative care and major operations.
Before You Quit:
Make Sure You Are Healthy
Before purchasing the cheapest health plans, you need to make sure you are healthy.
This means getting all your health examinations done to get the green light from your doctor. This also means taking care of yourself with regards to your diet and sleeping habits.
If you need regular medical care, then a low-cost health insurance will not be a good fit for you and will cost you a lot more.
Get Your Appointments and Operations Done
If you have any operations or procedures you have been putting off, now is the time to take care of them!
When I decided to leave my job, I realized that where were two procedures I still hadn’t scheduled:
- Getting a tooth filling
- Wisdom teeth extraction.
I made sure to schedule them as soon as possible and waited until I completed the procedures before handing in my two-week notice.
I saved $1,500 for my wisdom teeth extraction with my company-sponsored group health insurance. Here are the numbers:
- I paid $900 to extract all four of my wisdom teeth with my company-sponsored insurance.
- Without insurance, this would have cost up to $4,000.
The bill from my wisdom teeth operation
Here’s the truth: a low-cost high-deductible personal plan will hardly cover these costs so I would have had to pay for this out-of-pocket.
There is a Penalty for Not Having Insurance
Under the Affordable Care Act (ACA or Obamacare), it’s required by law that every US citizen gets health insurance.
The penalty for not having insurance is calculated, as of 2016, in two ways:
- 2.5% of household income
- $695 per adult and $347.50 per child under 18
The fee has increased since 2015, so now is the time to get insurance if you haven’t already.
3 Ways for Freelancers to Search for Health Insurance
1. Healthcare.gov or State Exchange-Equivalent
Healthcare.gov is the health insurance exchange run by the federal government. It consists of a searchable database showing available coverage depending on your location, age, and other factors. You can get started with their quick start guide here.
There are nineteen states that operate their own health exchanges. If you are from one of them, then you will need to go on your state-administered website to search for insurance.
Keep in mind that open enrollment typically runs between November to January (exact dates differ by year). This means that you can only apply for insurance within that time period.
Types of Health Insurance Plans
Under the ACA, insurance plans are offered at five tiers:
The higher metal tiers are more expensive up front but cover more of your medical expenses throughout the year. Lower tiers have lower monthly premiums but cover a smaller part of your medical expenses.
For example, a Bronze plan will cover 60% of average costs whereas a Platinum plan covers 90%. But both plans have very different monthly premiums. For more information on metal tiers click here.
You May Be Eligible for a Subsidy
If you make under $45,000 as an individual (or $94,200) for a family of four, you may be eligible for a subsidy or tax credit.
2. Private Insurance Companies
Private insurance companies such as Blue Cross Blue Shield or Aetna offer direct sales to individuals via their websites or call centers. However, I’ve always found their websites to be very clunky and hard to use.
Instead, I recommend going through personalized search services like Stride Health. These services are completely free and the process seamless. All you need to do is to answer a series of questions, and Stride will provide you with a list of recommended health plans.
The best thing about Stride is that they can help you find both health and dental insurance, saving you tons of time.
Let me take you through the process:
1) You will be asked a series of questions regarding your health
2) You will be presented with a list of recommended plans. You can find more information about a specific plan by clicking on it. In this case, we click “Show me why this is the best plan” for the Blue Care Direct Bronze 103 with Advocate
3) Stride will provide comprehensive information about the selected plan
4) Once you pick a plan, you must fill out an application form.
Once you finish the form, Stride will automatically send your information to your insurance provider. All you have to do is wait for a confirmation email from your insurance provider. Once you get the email confirming your enrollment, you just have to pay your insurance premium month-to-month.
Stride Health makes the process so simple and that’s why it’s my go-to.
3. Professional Organizations
Another great option is to go through professional organizations or alumni groups. These groups often offer you health insurance at cheaper group rates.
Since you’re a freelancer, you should check out The Freelancers Union’s health benefit packages. The process is not as seamless as Stride Health and there are less options to choose from. But the savings may be worth it.
Stay Healthy
I hope the information above helps you on your steps to enrolling in health insurance. Remember, staying healthy is key to being able to enjoy the freelancer’s lifestyle.
When you work for a large company they take care of your health benefits, but when you work for yourself you are solely responsible for your health. Don’t bog yourself down by not making this a priority.
Below are additional resources that I have referenced in the past and I encourage you to do more research on your own:
- Health Insurance Guide | Stride Health
- Freelancers Guide to Health Insurance | Intuit QuickBooks
- Everything Freelancers Need to Know About Health Insurance | Freelancers Union
- Either go on actual Health Care Providers website (Blue Cross Blue Shield)
Please share this post with other freelancers or business owners! This is really important stuff that everyone needs to know about.
Victor runs The Remote Lifestyle (http://theremotelifestyle.com), where he teaches you step-by-step how you can become a successful digital nomad.
