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Options for Self Employed Health Insurance Plans

self employed health insurance guide

The Number of Self Employed in the US

Recent statistics indicate that in the United States almost 15 million people make up the self-employed workforce. That’s roughly 1 in 10 working persons who live the dream of being their own boss, but is it the dream that they had imagined. While there’s the freedom to set your own limits and define your future, we all know that with great freedom comes great responsibility.  Unlike the standard workforce, that goes home at 5 pm (well maybe not all), it’s the self-employed that almost always works a 40+ hour work week. That’s because they have to put on their other “hats” and become the company bookkeeper, Office manager, supplies manager, janitor and the list goes on.

We’ve created a simple self employed health insurance guide to help you find the best policies available to you. Read on to see what you need to know about self employed health insurance plans and how health care reform has affected self employed individuals since the creation of the Affordable care act (ACA).

 

Is Self Employed Health Insurance Really Necessary

The Short answer is an astounding YES, Health insurance is a must for anyone that holds any assets or doesn’t particularly appreciate being indebted for the rest of their life. Health insurance has always served as a financial protectant. While cost and coverage has changed over the years the main purpose of health insurance has not changed, and that simple purpose is to keep you whole.   Medical debt in the US is the primary cause of bankruptcy and continues to be the case even with the creation of the affordable care act (ACA) or better knowns simply known as Obamacare

 

Before you Buy Self Employed Health Insurance

Before calling insurance companies and looking for quotes, it’s a good idea to first assess your needs. Some basic questions you might want to ask yourself are:

 

  • Do I have any pre-existing conditions? – This may seem like an outdated question considering Obamacare plans cover pre-existing conditions. The reason why we bring it up is that depending upon your pre-existing condition your most likely going to want to find a policy that affords coverage for your particular issues. Different policies offer different levels of coverage. Choosing a plan with a low monthly premium will most likely result in higher out of pocket costs when using your policy. If your taking medications then you will certainly want to find a policy that affords coverage for your particular prescription. Just because a policy may cover prescriptions doesn’t mean that it will cover your particular prescription

 

  • Will anyone else be covered under this policy? – The number of dependents on your health insurance policy will have an impact on the price of your premium. Typically, the more persons covered, the higher the premium will be. However, the ACA has had a very positive impact on that, by capping the dollar amount through “multiples”. Policies can only charge based on Age and multiples. Meaning that if two parents are covered, their premiums will be based on their respective age however if those parents have 10 children the insurance company cannot charge for more than 3 children.

 

  • How often do I want to/need to see the doctor? – Individuals with ongoing health conditions might consider a plan with lower deductibles to save you money. These types of plans will typically have higher monthly premiums than plans that carry higher deductibles. A high deductible health plan would be better suited for those who do not plan on seeing a doctor as regularly. This applies to all polices and not just self employed health insurance plans.

 

  • What is my financial situation? – This may be one of the most important questions to ask yourself when looking for coverage. Self Employed health insurance for an individual can range anywhere from $75 per month all the way to $3000 a month depending on your needs and where you live. With the introduction of the ACA, America was introduced to the insurance subsidy. A formula that takes your annual income into consideration and depending where your stack up on a chart called the Federal Poverty Level (FPL) will determine if a subsidy will offset your cost. This is of particular interest to the self employed considering that your income is often subject to much higher deductions than the non-self employed. Write Offs for business travel, office expenses, equipment … can directly impact your final dollar amount paid for that self employed health insurance policy.  While the concept of subsidy may prove to be very valuable, what most sole props don’t realize is that you are probably basing your earnings on your prior year, while the govt is using your estimated earnings for the current year. As a self employed, it’s not uncommon to have some years that are feast and other years that are famine so gauge your estimated income carefully. Your much better airing on the side overestimating your income which yes results in a lesser tax subsidy. However, the following year that overestimate will come back to you in the form of a tax credit

 

Tax Forms you are Required to File for Self Employed Health Insurance.

If you expect to receive a self employed health insurance subsidy then expect Uncle Sam to require you to complete at least one health care Tax form. The most common forms sole props will file are 1095-A. This form does not come from the IRS but rather the marketplace that you bought your insurance from (more on marketplaces below). Simply put, this form asks and indicates how much you paid for insurance last year and how much of a subsidy you received. It also asks for something called the SLCSP (second lowest costing silver plan) which is used to calculate your subsidy. SLCSP is the standard that the marketplace uses to gauge the cost of policies relative to the subsidy received.

Once that 1095-A form is completed, your accountant (or your software package) will use those numbers and move them onto an 8962. That’s a health insurance premium credit tax form which is the official health care subsidy tax form that the IRS uses.  Depending on your health plan and who is covered you may instead be required to file form 1095-B instead of form 1095-A. 1095-B while almost identical to 1095-A applies to non-individual coverage, such as a family plan.

 

Self Employed Health Insurance Premium Tax Deduction 

Keep in mind that the subsidy listed above is only available to plans purchased on the marketplace. If you purchase a self employed health insurance plan outside of the marketplace you’re still allowed to write off 100% of the cost of the health insurance premium. This deduction is on a pre-tax basis and that write-off is often substantial for a self employed person especially since it will lower your overall adjusted gross income, thus reducing your tax liability.

Some thoughts to consider regarding this deduction.

  • If you cover your spouse under your plan and your spouse was offered health insurance through her company and she opted not to participate, you cannot write off the portion of her premiums.
  • Your deductions cannot exceed the income you earned from your business. Example, if you had a bad year and claimed a loss, you cannot claim the deduction because the business did not generate any positive income
  • If you’re part of a partnership or LLC which lists you as a partner your still treated a self employed for tax purposes, so the points above would still apply

 

Do I or any of my dependents have special medical needs?

Almost similar to the pre-existing condition section above, if you do have special medical needs then you want to be certain of the differences between policies that may affect your out-of-pocket cost and coverage. While all ACA plans have to cover 10 Essential health benefits (EHB), your special needs may not be accounted for under those EHBs.

Special needs don’t only apply to the type of coverage but also to the flexibility of the coverage. Example, if you’re a traveling salesman and find that you’re in a different state each month, then a standard policy will not suit you. You may find that you have flu like conditions in Texas which may not justify going to the emergency room but would require a doctor’s office visit.  Perhaps the following month it’s another issue in another state. You’re going to have to find a policy that has access to a national network, such as a PPO health insurance plan. If you have any special needs its strongly recommended to review the Summary of Benefits coverage and you even have the right to ask for a sample contract indicating how special needs are covered and reimbursed.

 

 Do I foresee any major life events?

Foreseeable major life events like having a child or getting married should impact on your insurance buying options. If you are planning for any major life event in the near future then you may want to take that into consideration when shopping for a policy. The primary reason is that the window to purchase a health insurance policy has changed. Prior to the creation of the ACA, a self employed individual had the option to purchase a health plan 365 days a year. For Marketplace plans that has changed. For non-Marketplace plans, fortunately that hasn’t( for more information on non-marketplace health insurance plans please see the section below titled Post ACA Self Employed Health Plan Options).

The federal government has limited what’s called the open enrollment period to just 45 days in a typical calendar year. The Open Enrollment Period (OEP) is the official shopping season for marketplace health plans. That period often runs from November 1st through December 15th of each year. While you always have the opportunity to add dependents and drop coverage, it’s possible that you may find one policy better suited for a family plan as compared to another policy more suited for individual coverage, as they relate to foreseeable life events. So outside of the OEP you cannot drop policy A to purchase policy B. There are exceptions that fall under the Special Enrollment Period (SEP) but foreseeable life events usually don’t apply.

 

How has Obamacare Changed Shopping for a Self Employed Health Insurance Plan

With the rollout of the ACA, many new markets have opened up for the general public, most noticeably the creation of the federally facilitated marketplace. better known as healthcare.gov which operate in 37 states. For those states that don’t participate in healthcare.gov each state has their own form of a health insurance shopping marketplace.

These marketplaces were designed to provide affordable coverage for two segments of the population. Individuals and small business owners. The requirement for a small business owner to purchase a group policy is to have between two to one hundred employees.  The other available option which the self employed have been corralled into is the individual policy option. Naturally one assumes that the individual marketplace option is a well suited for the self-employed but is that really an ideal fit?

The ACA was specifically designed to provide insurance to the uninsured. Sole proprietors were not considered the uninsured. Rather they make up a general healthy working population that is less likely to utilize benefits. So are individual health plans on the federal and state exchanges an ideal fit for the self-employed. Most would agree not.

 

Major Self Employed Health Plan Changes Post ACA

The self-employed have seen three major changes since the implementation of the ACA

  • Almost all major Carriers have dropped out of the individual marketplace leaving half of all states with 2 or less insurance companies to choose from
  • Plans types have decreased significantly including the disappearance of the Preferred provider organization (PPO) and the Point of Service (POS) plans in the marketplace.  Thus, eliminating the ability to utilize doctors and hospitals that are not participating in the plan’s network.
  • Prices have skyrocketed for several reasons including mandatory coverage of the uninsurable. The failure of the public to embrace the ACA and political agendas on both sides of the aisle

 

Post ACA Self Employed Health Plan Options

While all of the above seems to point to dire conditions in finding a self-employed health insurance plan, markets still do exist. Sole props still have a few strong options including

  • Federal & State marketplaces – yes if you find the coverage adequate and affordable it’s an obvious option. The subsidy can be a very attractive and cost-effective benefit, if you qualify. Keep in mind that even if you don’t qualify for the subsidy as a self employed individual you can always write off the cost of the health insurance premiums on a pretax basis. One of the major drawbacks is that marketplace prices have skyrocketed and plan selections have been drastically reduced
  • Association health plans – these plans are designed for the self-employed and exist in almost every industry. While the number of association health plans have decreased since the ACA, there are still affordable options. Associations are usually professional organizations which have common interests related to the industry that you’re in. These associations often have a large membership base which is an attractive element to an insurance company, especially if that membership pool is healthy and working. As such, these associations contract with insurance companies for plans specifically designed for their membership and pricing is often a factor.
  • Union Health Plans – share many similarities to association health plans however in exchange for union benefits, you’re required to join and pay union dues. Union health plans often provide richer benefits and almost always offer PPO and POS options, providing the flexibility of coverage that many sole props are looking for.
  • Chamber health plans – similar to association health plans, however members are usually required to be in the geographic region of the chamber their interested in joining. They also contract with Insurance companies but often don’t have the same buying power that association plans do have. There are exceptions with chambers on the city, state and national level, which prior to the ACA did have greater health insurance purchasing power, though with the rollout of the ACA that has mostly been reduced to offering marketplace like insurance plans
  • Ministry Health Insurance Plans – First these are health insurance plans in name only, meaning that they aren’t true insurance plans which are designed to make an individual whole. If you’re an affirmed Christian who attends church at least one time per week then these plans may suit you. Unlike insurance plans which require you to pay monthly premiums, these plans have a monthly share fee and an annual fee. Medical bills are paid from the “sharebox” and the ministry has the right to deny any medical bills as they are not contractually obligated in the manner insurance plans are.
  • PEO health plans –  A few Professional employment organizations (PEOs) offer membership to sole props however with membership, you’re required to become an employee of the PEO in return for benefits, such as health insurance, payroll and other business-related benefits. Becoming a member/employee means that you are required to be on the PEOs payroll for a minimum number of hours per week, in most cases that’s thirty plus hours per week. The obvious benefit is that the health insurance is cost effective, usually offering plan types parallel to that of union plans and you still qualify for the sole tax write offs.

 

Self Employed Health Insurance Guide FAQ:

Who is considered self employed?

A person is self employed if they generate their own income as a freelancer or through the ownership of a business, as opposed to being an employee of another company.

 

I get paid with a 1099 form, am I self employed?

Yes, you would be considered self employed as an independent contractor.

I’m a self employed American citizen but I live in another country, how does this apply to me?

As an American living abroad you are exempt from the individual mandate for health insurance under the Affordable Care Act however it would be very wise to get a policy that would cover you overseas, such a travel insurance policy or an Expat policy.

I’m self employed and living in the United States but I have dual citizenship, how do I get health insurance?

If are currently residing in the United States then you are subject to the rules and regulations of the Affordable Care Act. Meaning you will need to purchase health insurance under the individual mandate.

I’m here legally on a residency visa and self employed, how do I get health insurance?

As a legally permitted resident of the United States you are subject to the Affordable Care Act’s individual mandate and will be eligible to purchase health insurance through your state’s health insurance marketplace or any of the options listed above.

I’m a self employed undocumented immigrant, how do I get health insurance?

As an undocumented immigrant, you are not eligible to participate in the health insurance marketplaces. However, there may be options available from private insurance companies such as a travel insurance plan which can provide coverage for almost up to a year.

I plan on purchasing insurance at my state’s health insurance marketplace during the open enrollment period but I need coverage until then, what are my options?

See below

 

Contact Us

At Vista Health Solutions, we specialize in the self employed health insurance market and group insurance plans. With over 20 years of working with sole proprietors our team has both the knowledge and the markets that make us the number one self employed health insurance marketplace. Feel free to use our online quoting tool or contact our knowledgeable staff that can answer your self employed health insurance questions at (888)215-4045

 

"Vista Health Solutions" www.nyhealthinsurer.com Tel (888)215-4045 Email info@nyhealthinsurer.com