Being self-employed is awesome. But being self-employed also means that in general, you provide your own individual health insurance. So, not surprisingly, your number one question is: what is the best health insurance for the self-employed?
So, what is the best health insurance for the self-employed? Any plan on healthcare.gov if you qualify for a premium subsidy. In the absence of a subsidy, I recommend a Medical Cost Sharing plan. That said, there are other alternatives as well.
In this article I will also answer these additional questions:
In this post I will try to answer all of those questions and more.
Is the Best Health Insurance for the Self-Employed on Healthcare.gov?
If you qualify for a premium subsidy or have any preexisting conditions, I suggest that you begin with the Health Insurance Marketplace or healthcare.gov.
The Health Insurance Marketplace is the government-run website where you can buy health insurance policies that comply with the Affordable Care Act (Obamacare).
A health insurance policy that complies with the Affordable Care Act cannot refuse to provide full coverage due to a preexisting condition. In addition, they cannot exclude any preexisting conditions nor can they charge more due to a preexisting condition. Finally, a health insurance policy that complies with the Affordable Care Act (Obamacare) must cover preventative care at 100% regardless of the deductible.
Perhaps the best reason to go to the Health Insurance Marketplace is if you qualify for a subsidy. If your income if your is below a certain threshold, you may be eligible to have the federal government pay all or part of your health insurance premium.
How Do You Qualify for a Health Insurance Subsidy When Self Employed?
There are two parts to qualifying for a health insurance subsidy. First, you must make more than a specified minimum annual income. Surprisingly, it is possible to not make enough money to qualify for a subsidy but make too much to qualify for Medicaid.
On the other hand, you can make too much money to qualify for a subsidy. Here is a chart showing the maximum allowable income to qualify for a health insurance subsidy.
The closer that your income gets to the maximum allowable income, the smaller your health insurance premium subsidy will be.
To learn more read, read my post on the Affordable Care Act https://myhealthcare360.org/the-affordable-care-act-obamacare-what-you-need-to-know
What if I make too Much Money?
One of the really great things about being a self-employed such as a Freelancer or Independent Contractor, is that there is no ceiling to your income.
If you have been actively marketing yourself there is always the possibility that the floodgates will open and you will get tons of new clients. Overnight you can go from a starving, self-employed individual to having more business than you can keep up with. And where last year you could barely pay your rent, suddenly you are in the market for a new home!
This can be problematic for those of you who qualified for a subsidy. If you are single and stated that your expected income would be $35,000 but end the year with $55,000, you will have to repay your subsidy.
Let us look at an example based on NC health insurance rates and a 40-year-old male.
Our 40-year-old male earning $35,000 would qualify for a subsidy of $182 a month on healthcare.gov in North Carolina. Using that subsidy this individual could purchase a $7000 deductible plan that qualifies for a health savings account. Because he receives a $182 health insurance subsidy his monthly premium is a low $116.
If this 40-year-old freelancer finishes the year with $55,000, he would have to repay the $2184 he received as a subsidy.
On-the-other hand, if instead, this individual only made $25,000 he would receive an additional $1584 when he files his taxes. That is because his health insurance subsidy would have been $314 a month based on $25,000 of annual income.
Despite the possibility of having to repay the subsidy, my suggestion is to always take advantage of it if you qualify. You could always choose to take less of a subsidy and receive the balance as a refund at the end of the year. This is especially true if using the subsidy is the difference between having health insurance and being uninsured.
If I Do Not Qualify for a Subsidy What is the Best Health Insurance for the Self-employed?
If you are successful and make too much money to qualify for a health insurance subsidy, there are some very good and affordable health insurance options.
In my opinion, the best health insurance for the self-employed is a Medical Cost Sharing Plan. But there are several other options.
If you talk with different health insurance agents you will hear about all the following health insurance products:
Sadly, too many health insurance agents will misrepresent the benefits of these policies. Also, within each category, there may be several variations in the coverage provided.
While each of these policies may have a place, you have to know what you are looking for.
Below, I will briefly review each of the options and provide conclude with my recommendation.
Is Minimum Essential Benefit Health Insurance the Best Health Insurance for Self-Employed Individuals?
Not only is this not the best health insurance for self-employed individuals, it is almost the worst! In my opinion a minimum essential health insurance policy isn’t even worth the cost of the paper it is printed on.
A minimum essential policy provides the minimum benefits necessary to avoid the tax penalties under the Affordable Care Act’s shared responsibility provisions. But since the penalty for not having health insurance is no longer applicable, this policy serves no purpose.
These policies are still offered by employers with 50 or more full-time equivalent employees. These employers are subject to two different penalties if they do not offer a qualified health insurance plan. By offering a minimum essential benefit policy they can avoid the larger of the two penalties.
But do not mistake these policies for what we think of as health insurance. If you get diagnosed with cancer or need coronary bypass surgery, these policies provide almost no financial protection.
Are Indemnity Benefit Health Insurance Policies the Best Health Insurance for the Self-Employed?
While I would not categorize these policies as the best choice, they do solve the health insurance problem for the self-employed.
Most people have never heard of indemnity benefit health insurance. Indemnity benefit health insurance is a type of health insurance that lists all the medical events that are covered under the policy. For each covered benefit there is a specified payment.
For example, the surgeon’s benefit for an appendectomy might be listed at $2700. If your surgeon charges you $3700, you are responsible for the additional $1000. On-the-other hand, if the surgeon only charges $2000, you get to keep the $700 difference.
Many of these plans offer very attractive premiums but beware. It is very important to know what medical events are listed as covered events by the policy. Equally important, you must know what is not covered. Because if it is not listed, it is not covered! You also should know what the basis of the benefits is. Are the benefits based on a multiple of Medicare or some other value?
Ask if the insurance company provides any assistance in talking with or negotiating with your medical providers. This is particularly important where the provider charges more than the covered benefit.
My personal favorite Indemnity Benefit Health Insurance is Sidecar Health. Virtually every conceivable medical procedure is covered under their plan. And your benefit is a multiple of Medicare.
Best of all, using their app you can look-up every possible procedure and learn what the plan will pay in advance of any services. Plus, they provide a team of skilled negotiators to assist you.
If you would like a quote here is my personal link: https://sidecarhealth.com/for/mels Your premium will be the same whether you go to Sidecar Health directly or use my link. If you do use my link Sidecar will pay me a commission. That makes me your health insurance agent and I always will be there to help you.
If you have any questions, feel free to schedule a call with me: https://mels.youcanbook.me
Is Short-Term Health Insurance the Best Health Insurance for Self-Employed Individuals?
Short-Term health insurance policies are a good choice for health insurance for self-employed individuals.
Like all alternatives to an ACA (Obamacare) compliant health insurance policy, you must be relatively healthy to buy one of these policies. But if you do qualify, these plans provide a more traditional major medical health insurance coverage.
Like all major medical health insurance policies, these plans have a deductible, coinsurance, and often copays. And they also provide a maximum out-of-pocket liability.
To review, the deductible is the amount that you pay before insurance will pay any benefits. Once you meet your deductible, you may also pay a percentage of all costs until you meet your maximum out-of-pocket limit. After that, the insurance company pays 100% of all approved charges.
Another drawback to the short-term health insurance policy is the fact that your coverage is only good for a specified number of months or years. As a result of changes implemented by President Trump, you may be able to buy coverage for up to three years. After the third year, you must reapply and requalify. Some policies will only allow you to keep your policy for up to one year after which you have to requalify.
The biggest problem with having to requalify is that if your health changes you may not be able to reapply. To deal with that possibility I always recommend that you time the anniversary (or renewal date) to coincide with the annual ACA (Obamacare) open enrollment. That way, if you develop cancer or other major medical condition you can buy coverage on healthcare.gov and not be uninsured for very long.
One area where these short-term health insurance policies fall short is prescription drug coverage. Even when one of these policies include a prescription drug benefit, it is generally not very good.
Most of these short-term health insurance policies are PPO or HMO plans. That means that you must use doctors and hospitals that are in the network. Always check to make sure that your doctor is in the network if you go this route.
My personal preference for short-term health insurance is a unique PPO plan that does not penalize you for going out-of-network. That means that you can use any doctor or hospital, anywhere in the United States. If you would like to get a quote you CLICK HERE.
Using my link does not increase the cost but I will receive a commission if you enroll. That also means that you get me as your insurance agent. Feel free to schedule a time to talk with me if you have questions or need help enrolling. SIMPLY CLICK HERE TO SCHEDULE
The Best Health Insurance for Self-Employed Individuals is Medical Cost Sharing
Technically it not health insurance at all. But It Is Better
For anyone who does not qualify for a premium subsidy and who doesn’t have any major health conditions, Medical Cost Sharing is always my first recommendation. But before enrolling in a Medical Cost Sharing plan you need to understand that Medical Cost Sharing is not insurance. Cost Sharing is a strategy where individuals (and families) form a community dedicated to helping members pay their medical bills. Each month members contribute a set dollar amount into a fund that is then used to pay the medical bills of members.
Most people know these plans as “Christian Health Sharing Ministries.” The best known and oldest of these is Christian Healthcare Ministries. This plan has been around since 1981 and is still going strong today.
The Next Oldest Health Sharing Ministry is the Samaritan Ministries Health Care Sharing. This plan was founded in 1994 and has thousands of members nationwide.
After the passage of the Affordable Care Act (Obamacare) these plans gained a lot of publicity. Originally, there was a tax penalty for anyone who did not purchase a qualified health insurance policy. However, under the terms of the Affordable Care Act (https://myhealthcare360.org/the-affordable-care-act-obamacare-what-you-need-to-know/) membership in a legitimate health sharing ministry met the requirement for having health insurance. Since costs were significantly less than health insurance and membership eliminated the penalty thousands of Americans enrolled.
Within a couple of years many newer health sharing ministries began to appear. And while members in Christian Health Share and Samaritan Ministries Health Care were very happy, members of some of the newer plans were less enthusiastic.
How Does medical cost sharing work?
As I mentioned above, members contribute a set monthly dollar amount into a community fund. Then as members submit their medical bills, the community reimburses the member for incurred costs. But Medical Cost Sharing communities do not generally reimburse members for everyday medical expenses such as routine doctor visits for the flu or an urgent care visit.
Most Medical Cost Sharing plans require that medical bills exceed some initial amount before they will reimburse you as a member. Unlike a deductible in health insurance, this initial amount of medical bills is per illness or accident. With a deductible, each medical bill is added to previous bills to meet the deductible.
As an example, a Medical Cost Sharing plan might require that members the first $1000 of any one accident or illness. If a member injured a leg playing sports his medical bills might look like this:
Emergency Room: $1400
X-ray of leg: $150
Follow-up Visit: $100
Total Medical Bills: $1850
Shared by The Community: $850
Member Responsibility $1000
Most people ask about how Medical Cost Sharing deals serious and expensive illnesses such as cancer or heart attack. You must remember that this initial amount that is the member’s responsibility is per illness or accident. If you were diagnosed with cancer and incurred medical bills of $100,000, you would still only be responsible for $1000 in this example.
Medical Cost Sharing Under the Affordable Care Act
In its original form, the Affordable Care Act mandated that Americans own a qualified health insurance plan or pay a fine. But health insurance was (and is) very expensive. For Americans that made too much money for a subsidy, buying a health insurance policy was incredibly expensive. In addition, they would still have a $5000 deductible, no copays, and a possible $2500 out of pocket. To many Americans this was unacceptable.
Luckily, there was a provision that allowed Americans to participate in a health sharing ministry and avoid the tax penalty. But, to qualify a health sharing ministry had to meet certain requirements. To avoid the tax penalty the health sharing ministry had to:
- Be a 501(c)(3) organization.
- Members must share common ethical or religious beliefs.
- Must not discriminate against membership based on the state of residence or employment.
- Members cannot lose membership based on the development of a medical condition.
- Must have (or a predecessor must have) existed and been in practice continually since December 31, 1991.
- Must be subject to an annual audit by an independent CPA which must be publicly available by request.
The Different Approaches to Medical Cost Sharing
The earliest health sharing plans we incredibly simple. Members made a monthly contribution to the community fund. There were no preferred providers or health maintenance networks. And there were no precertification requirements.
Today there are several plans, both faith-based and secular that utilize this approach. Under this approach, you are essentially a “cash-pay” patient when you receive medical services. You try to explain to providers that you are a member of a medical cost-sharing community and they will send you a check for your medical bills. The challenge for members under this approach is that you must deal directly with your medical providers. If they want immediate payment since you do not have insurance, you may have to utilize your credit cards.
To deal with the challenges posed by you being a cash-pay patient, several medical cost-sharing plans began to mimic health insurance. They utilized a preferred provider network and provided an ID Card. Even though your plan was not health insurance, it looked like health insurance. As a patient, you provided your ID card, and the provider filed the claim directly with the plan. But this approach had some problems and that resulted in member dissatisfaction.
A newer approach, and my personal favorite, is what I refer to as Managed Medical Cost-Sharing. In this approach, there is no PPO network. You can use any doctor or provider in the country. What makes this approach so different is that you are provided a lot of personal assistance. This Medical Cost-Sharing Community maintains a staff of healthcare navigators to assist you. These navigators will talk directly to your medical providers, including the hospital. They will negotiate the pricing in advance, agree on arrangements to insure that each provider gets paid. Plus, they even check provider credentials to make sure that you are working with a high-quality provider.
Medical Cost Sharing Compared to Health Insurance
If you are considering choosing a Medical Cost Sharing Plan instead of a health insurance policy, it is very important to understand the differences. With health insurance all of the financial risks are transferred to the insurance company. With Medical Cost-Sharing you the risk is shared with the community. So, what does that mean?
When you buy a health insurance policy there is a contractual guarantee between you and the insurance company. If your maximum out-of-pocket liability is $8000, the insurance company assumes the risk for any costs that exceed that liability. In theory, this means that if you were diagnosed with cancer and your total medical bill was $150,000, you would only pay $8000. There may be any number of reasons why you the health insurance refuses to pay certain medical bills.
I say “in theory” because as we all know it is possible for the health insurance company to deny a claim. In addition, it is possible that some of your treatment will be provided by an out-of-network doctor. Still, if all your providers are in-network and all procedures are approved, your total out-of-pocket cost would be limited to $8000.
To meet the guarantees of your health insurance policy, insurance companies are required to maintain minimum financial reserves. And if they are unable to pay claims, most state insurance departments maintain an insurance program similar to the FDIC for banks. Your medical bills will get paid.
There is one more difference between health insurance and medical cost-sharing. As a result of the Affordable Care Act, your health insurance is required to provide coverage for a set of preventative services. If you own a health insurance policy, your preventative services are covered in full. Learn what is covered here: https://www.healthcare.gov/coverage/preventive-care-benefits/.
How Medical Cost Sharing Differs from Health Insurance
When you join a Medical Cost Sharing Plan there is no guarantee of payment. These plans are not regulated by the Department of Insurance in your state. Plus, there is no reserve requirement. That means that your plan has no legal requirement to maintain a certain amount of money with which to pay member’s medical bills.
That said, the best of these medical cost-sharing plans (health-sharing plans/ministries) have never failed to pay a member’s medical bills. Medical Cost Sharing plans keep administrative costs to a minimum so that more of the member’s monthly payment can go to pay medical bills. And there is less red tape in paying medical bills.
One feature of medical cost-sharing plans results in members having a far better healthcare experience than with health insurance. The best of these plans eliminates the middleman from the doctor–patient relationship. There is no one second-guessing the recommendations of your doctor. Let me give you an example.
My daughter has been trying to find out why she has been experiencing a lot of pain. Her doctor wants her to get an MRI but her insurance company has declined the request. She had to visit a second doctor and get a second opinion that agrees with the first doctor. The second doctor had to resubmit. With Medical Cost Sharing the first doctor would have ordered the MRI, she would have gotten it and the Medical Cost Sharing community would have sent her check for any amounts beyond her responsibility. Simple!
Is Medical Cost Sharing More Affordable Than Health Insurance?
In a word, the answer is yes! Medical Cost Sharing is far more affordable than health insurance. It is more affordable both in the monthly cost and member out-of-pocket liability.
Imagine that you are a healthy 40-year-old, non-smoker who is comparing a health insurance and a medical cost sharing solution.
Major Insurance Co
Major Insurance Co
Cost Share My Recommendation
Any Provider – No Network
$1000 Member Responsibility Per Event
No doctor visit copay
No doctor visit copay
Zero cost for primary care
I have had several potential clients look at this chart and immediately focus on the health insurance plan with the $289 premium. While that is less than the $319 for the Medical Cost Sharing plan, there are huge differences in benefits.
You might think that the biggest difference is in the maximum out-of-pocket cost. With the traditional health insurance policy, the maximum out-of-pocket cost is $8550 while the Medical Cost Sharing plan is only $1000. But that is not the biggest difference.
The biggest difference is in the overall healthcare experience. First, with this particular Medical Cost Sharing plan there is unlimited primary care with no copay. But more importantly, you have a team of professionals helping you with all of your healthcare needs. That changes everything!
If you chose traditional health insurance with a $2500 deductible, $8,550 maximum out-of-pocket, and a $10 office visit copay (closest to the Medical Cost Share plan), the monthly premium would be $540.
The traditional health insurance plan includes coverage for prescription drugs while the Cost Share includes a discount formulary. The question that you must answer is this: is it worth $220 a month ($2640 annually) to have a prescription drug benefit? That will depend on your current health situation.
What to Look for in Medical Cost Sharing
Is Medical Cost Sharing sounding like something worth looking into for you? If so, you need to understand how to choose the best plan for you needs. This checklist might be helpful to you.
- Is the plan faith-based? If so, can you honestly say that you agree with the belief system of the plan? If not do not enroll. You do not want to find yourself having your medical bills denied due to misrepresentation.
- Does the plan utilize a healthcare network? My advice is to avoid plans that use a network. In choosing a Medical Cost Sharing Plan you do not need a third party getting involved in your medical care. That should be between you and your provider.
- Does the plan require pre-approval for services? The best plans will assist you in finding the best care but leave the decision-making between you and your providers.
- If you are choosing a secular cost sharing plan, can you abide by their lifestyle rules? Many of the secular plans utilize lifestyle in place of an affirmation of faith as the basis of the community. Read their rules in full.
- If possible, find a plan that provides a healthcare concierge team to help you engage with your providers. While you will still be a cash-pay patient having a healthcare team to talk with your providers can make dealing a medical event less stressful.
Is Health Insurance Deductible for Self-Employed
Another frequent question is this: is health insurance deductible for self-employed individuals? The answer is that health insurance is deductible for self-employed individuals but you must meet certain requirements.
In order to deduct your health insurance premiums as a self-employed individual you must actually show a profit in your business. You may deductible 100% of the premiums, up to the amount of profit that you generated. You may not deduct your health premiums if you show a loss from your business.
It is also important to note that if you are eligible for coverage through your spouse’s employer you are ineligible to the self-employed health insurance deduction. This applies even if the cost of buying your own health insurance is less than the cost through your spouse’s employer.
Finally, since Medical Cost Sharing plans are not insurance, the cost will not be deductible. If you are taking my advice and participating in a Medical Cost Sharing plan you will have to weigh the benefits and cost against the loss of the business deduction.
Group Health Insurance for the Self-Employed
In talking with self-employed individuals, one of the most frequent questions is: is there a group health insurance for the self-employed?
The short answer is that there are no group health insurance plans designed for the self-employed.
The longer answer is that there are companies that have formed associations aimed at the self-employed specifically to have a “group” health insurance plan that targets the self-employed. Sadly, the reality is that these plans are often little more than individual indemnity benefit health insurance policies that have been filed as a group health plan.
But if you compare the costs and benefits to any other health insurance plan, you will be very disappointed. These plans tend to be expensive for the benefits provided.
Always Work with a Professional, Independent Health Insurance Agent
I end every post with this suggestion. This is especially true when it comes to your health insurance choices as a self-employed individual. There are a lot of options. And some of those options may look like a group health insurance plan for the self-employed. But health insurance and healthcare are extraordinarily complex. A professional, independent health insurance agent will understand those complexities and be able to guide you to the best choice for your objectives and budget.