This is a big topic. I’m not going to pretend to be an expert in this area. I’m still learning about health insurance as it relates to the self-employed person. But I have waded through a few of the details and I’m prepared to share with you how I made my decision on buying health insurance.
COBRA Continuing Coverage
First, know that if you recently left your job and were covered by a group plan there, you can take advantage of COBRA continued coverage. In my case, to continue with my old group plan, COBRA ended up being very expensive. I think a lot of newly self-employed folks find the same thing. That’s why I’m writing this post.
Group Health Insurance vs Individual Health Insurance
One of the first things you need to understand when buying health insurance is the difference between group health insurance and the individual kind. This is something that I didn’t have a firm grasp on going in and I think it helps to understand how these differ so that you know what to expect.
Individual health insurance is what you purchase if you can’t participate in a group plan. You buy this on the open market at a place like eHealthInsurance.com. As an aside, you can purchase this for your entire family. Individual doesn’t mean one family member.
Group health insurance is cheaper (with the exact same coverage) than individual insurance. This is simply because with the group, the risk is spread across a large number of people. Also, typically with group plans, your employer is picking up some of the costs. But the biggest difference, for me at least, is in this next section…
Maternity Coverage Health Insurance
Here’s the big surprise waiting for most people when they go the self-employment route. Most individual health insurance plans don’t automatically include maternity coverage. And in some states you can’t even get maternity coverage on an individual plan. When you think about it, it makes some sense. Maternity is a one time, expensive, somewhat-elective procedure. In a group plan, these costs are absorbed by everyone. On the individual level, it would mean a big payout by the insurance company just for one person. Therefore, they don’t touch it usually.
Group Health Insurance for Self-Employed
Once faced with the thought of paying for all the maternity costs, the next logical step for self-employed people going through this process is to want to jump back on some kind of group plan. The problem is, unless you have employees, you aren’t a group. You are an individual.
If you have a business and have it legally established with the state, you may be allowed to sign up for group health insurance as a “one man group.” See this list of one man group states.
Another way to get on group insurance is to look at your trade organizations. Costco even has a health insurance plan.
Also there are faith-based medical sharing groups, like Medi-Share that you could look into.
Changes Coming from the Healthcare Reform Bill
With all this, you may be thinking, “when does that healthcare reform bill kick in to save the day?” Well, you actually have a few years to go. Starting in 2014, if you are self-employed, or you do not have health-insurance because you can’t afford it (maybe you’re unemployed), will be able to purchase health insurance via state health insurance exchanges. This exchange is supposed to bring about less expensive individual health insurance. If your income is between 100% and 400% of the Federal Poverty Level (Federal Poverty Level for family of four is $22,050), there will be subsidies available to you. So, you could potentially get your health insurance for free.
How I Bought Individual Health Insurance
I ended up buying an individual health insurance policy that was health savings account (HSA) eligible with a $10,000 deductible.This is going to run my little family of 3 around $275 a month. It won’t include maternity coverage, so we’re going to either start saving for our next child (approx. $15k), or jump back on some group plan through my next employer.
I shopped for my policy through eHealthInsurance.com. If you’re considering self-employment, I’d definitely check out some quotes there first. In a later post I’ll break down the purchase process.