What Freelancers and Contract Workers Need to Know About Health Insurance
Getting adequate (and affordable) health insurance can feel like a nightmare when you're a freelancer or self-employed. Here's a guide to help you find the right plan for you.
Health insurance is a major stressor for many workers, but particularly for freelancers and contract workers. The cost—and the less-than-user-friendly system—can be extremely overwhelming for those of us who are on our own when it comes to researching and funding health care.
When I quit my job to freelance full-time and moved from the United States to Canada last year, I had a lot of questions. Did I maintain American health insurance? How could I, now that I didn't have an employer providing it? Could I secure coverage abroad? After much research, I've learned that all health insurance options are not created equal—and, depending on your unique circumstances, you may have a variety of different eligible options to comb through.
Plans and coverage laws vary by state, so while we can't recommend specific plans for your situation and location, we can lay out the main options that are available to freelancers—as well as links to specific exchange sites and the definitions of important insurance terms. Additionally, we'll share what to look out for in terms of fees and costs, as well as what factors to consider before choosing health insurance as a freelancer or contract worker.
COBRA health insurance plans & eligibility
COBRA, or continuation coverage, allows workers (and their families) to continue group health benefits through a former workplace, for a limited amount of time while securing a new plan. This is a great option if you've recently left a job (or are considering it) to freelance.
In order to be a "qualified beneficiary" (that's an individual eligible for the plan, aka typically the former employee—you—and potentially their spouse and/or dependent children), you must be enrolled in the insurance plan before the "qualifying event" (whatever happened to make you eligible for continuation coverage: you quit, an involuntary termination, or an hour reduction).
If you're eligible, you should receive a letter from your employer or insurance company asking you to opt-in or waive COBRA. You have 60 days to decide—and note that you can change your mind as long as it's within the 60-day period. Life and disability insurance are not included, and religious organizations as well as employers with fewer than 20 employees are typically exempt from COBRA requirements.
COBRA payment, costs, and duration
COBRA costs depend entirely on the type of insurance you held at your former workplace. However, the bill may be a shock if your employer formerly covered most or all of the premium, as you will now be on the hook for 100% of the cost—and potentially an additional 2% for admin fees. Check with your HR department for detailed info about how much you can expect to pay.
If you have a Health Savings Account, you can use it to pay COBRA premiums; note this is the only instance you can use an HSA to pay insurance premiums. Depending on the qualifying event, coverage can last from 18 to 36 months. Coverage can be terminated in the following circumstances: The employer ceases to offer coverage (including going out of business), you fail to pay premiums on time, or a "qualifying beneficiary" becomes entitled to Medicare or joins another group health plan (i.e., a new job with coverage).
Continuation coverage is only meant as a transitional option and is best for those who don't want disruption in health care while leaving a job. It's particularly useful if you have pre-scheduled appointments or procedures that you don't want to jeopardize losing on a new plan—or if you are the primary insurance provider for your family.
Need additional details? This FAQ is a great resource for common questions.
Purchasing your own plan through the insurance marketplace
The Affordable Care Act created a marketplace, or exchange, where individuals can search, compare, and purchase insurance plans. This is done during open enrollment, between November 15 and December 15 every year. You'll need to be prepared to pay your first premium by the first of the year to ensure coverage. If a "qualifying event" occurs, you are eligible to secure coverage outside this timeframe, (referred to as a special enrollment period). Currently, there is a national special enrollment period until August 15, 2021 due to the COVID-19 pandemic.
The main public exchange available is healthcare.gov, a federal database of health insurance plans, open to those of all types of employment in 36 states. California, Colorado, Connecticut, Idaho, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Washington, and DC each have their own state exchange websites.
All plans offered through government exchanges must cover 10 essential health benefits as well as birth control, breastfeeding, and pre-existing conditions. States may add additional requirements. For example, New York opens special enrollment periods for women who become pregnant. This PDF is a great resource for state-by-state additional coverage.
To start your plan search, navigate to the exchange for the state where you reside and click "browse and compare plans." You'll enter biographical info, estimated annual income, and you'll have the option of additional filters. You should add a filter for any specific providers you want covered—make sure to enter the specific doctor's name, not the clinic, for best results.
The prices and projected government aid you'll see are based on income from the previous year. If it's your first year freelancing, you'll need to come up with an estimate. Try to be as honest and realistic as possible. If you project too high and don't end up making that much, you'll lose out on financial assistance. Alternatively, if you estimate too low and end up making more, you could end up needing to repay tax credits at the end of the year. To avoid headaches if you have a significant change in income, update your information on the federal exchange here. Or, if you live in a state that runs its own marketplace, head to the state site for California, Colorado, Connecticut, Idaho, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Washington, or DC.
What to look out for when choosing a plan
Type of plan
These require you choose a primary care provider (PCP, generally a General Practitioner) who acts as the gate-keeper and must refer you to all other health providers (except emergency and OB/GYN). These are not flexible and offer no out-of-network coverage; they're best if you're stationary and want one doctor to handle your health.
No PCP is necessary for this plan, which means no referrals—and it includes coverage in and out of network (out will be more expensive). These plans are good if you're mobile, don't have a lot of health concerns that require a point-person PCP, or if you may be getting care across state lines.
These allow you to pay for expenses, not premiums, with your Health Savings Account (unless it's COBRA, in which case see above). Note that these are often attached to higher premiums. It will be noted on the marketplace if a plan is eligible.
Insurance plan categories and tiers
Health insurance plans are broken down into five tiers—and as a general rule, premium cost and coverage increases with each level. Bronze plans are the cheapest, with 60% coverage; silver offers 70%, gold 80%, and platinum 90%). The lower-level tiers have higher deductibles. There is also a "catastrophic" category for eligible individuals.
We spoke to Sue Carlson, an insurance broker in Washington state, about the differences between these tiers; she confirmed that which tier is best for you is entirely dependent on your health needs. Bronze plans are often best for healthy, young freelancers who don't have regular prescriptions (outside of birth control) or care. Silver plans are slightly more expensive, but can end up being cheaper if you qualify for aid (more on that below). Gold and platinum plans are best if you have a lot of health needs, because while they're the most expensive, they have the lowest deductibles and the highest coverage.
"Catastrophic" plans are the cheapest, with even higher deductibles. But they can be a very affordable option to protect against worst-case scenarios while still paying for routine stuff out of pocket—if you qualify (you must either be under 30 or qualify for a hardship exemption).
There isn't much difference in cost between plans of the same metal tier between different insurance companies; the distinction is where you're covered for care. This is why it's important to use filters for specific doctors you want to ensure are covered. If you don't have regular doctors appointments, consider whether it's worth it to pay a bit more for a wider network.
Carlson explains that some companies, such as Molina, have a smaller network and can thus negotiate lower premiums, which are great as long as you're okay with having fewer provider options. Major companies such as Kaiser usually require you to seek care at their specific health centers, although they do cover some individual doctors at non-Kaiser clinics. Others still, Premera/Lifewise for example, have a wider network—that in turn comes with more expensive premiums.
Plan costs and payment
In addition to monthly premiums, you'll pay out of pocket until your deductible is reached, so keep that in mind when comparing plans. Premiums for the cheapest bronze plans range from $222 in Maryland to nearly $600 in West Virginia, while gold plans range from $324 in New Mexico to $825 in West Virginia. Note that cheaper plans can have deductibles as high as $7,000, while higher-tier plans' can be as low as $2,000 or less. This table and map are searchable by state for average (lowest) costs you can expect to pay. However, it's highly dependent on your age, health, and needs.
As long as you pay attention to premiums, deductibles and copays, and coverage, there shouldn't be hidden costs. Just make sure to check whether the plan charges a flat fee or a percentage for tests, prescriptions, etc. You'll need to decide, for example, whether you're okay with always paying $30 for X-rays or whether you'd prefer to change that to 50% of whatever each hospital charges for an X-ray.
As mentioned above, there are ways to get these costs down. A cost-sharing reduction (often referred to as "extra savings") is a discount that lowers how much you pay out of pocket for deductibles, copayments, and coinsurance. If you qualify, you'll be required to enroll in a silver plan. Eligibility is based on income, so as a freelancer, you'll need to estimate as accurately as possible; click here to check eligibility.
Premium tax credits are a bit different, as they lower your premium, not other costs. Eligibility is based on income estimates, but if you make between 100% and 400% of the federal poverty level, you qualify in all states. If you make above 400%, you can still qualify in some instances—click here to check.
You can use some, all, or none of the credit to help pay your premiums, but keep in mind: Since you're only estimating your income as a freelancer when you apply, if you end up qualifying for less (or no credit) at the end of the year, you'll need to pay the difference back. On the flip side, if you end up qualifying for more, you'll receive the difference back when filing taxes.
Note also that you must sign up through a government marketplace to use any of the above benefits. Insurance broker Carlson assured me that there's really no reason to use any other option, so don't get sucked into using private exchanges just because they're claiming to be more "user-friendly."
If you're interested in speaking to someone like Carlson, look up brokers (who can help you apply and recommend specific plans) and navigators (who can help you apply, but can't recommend specifics), in your state. They are typically free of charge. Links to each state's qualified broker lists are here: California, Colorado, Connecticut, DC, Idaho, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Washington. If you live in a state that requires you to go through the federal exchange, click here.
This can be a good option if you qualify. You'll need to be a United States citizen or legal immigrant between the ages of 19 and 64, you cannot qualify for Medicare, and you need to be able to provide proof of income below your state's threshold. You can also check if you're eligible for children's health insurance plan (CHIP). Note that these programs vary in name by state, so check your state here and this link for additional state-by-state details.
Join a family member's plan
If you're under the age of 26 or an eligible spouse, this is a good option to look into.
Options for out-of-country coverage
If you'll be traveling outside of the United States at all, you'll probably want to ensure you're covered abroad. If you'll mostly be doing short trips, you'll probably be okay purchasing travel insurance; World Nomads, Allianz, and Roam Right are all great, affordable options.
If you're one of the lucky ones who gets to permanently WFH, and are considering digital nomadism, you'll probably want international health insurance. Note that this is not the same as travel insurance; this is meant to cover you in another country where you'll be residing for months or years at a time. Cigna, AXA, and GeoBlue are all reliable, affordable options.