Health Insurance Options for the Newly Self-Employed

Fran
Lucy Lazarony
August 11, 2020

Whether they were laid off or they quit their jobs, many Americans are now self-employed. If you’re one of these people, congratulations! Enjoy the freedom of working for yourself and calling your own shots. But there is one thing you won’t want to take on all on your own. You’ll need a little help paying for medical services. In short, you’ll need a health insurance plan. Lucky for you, you’ve got plenty of healthcare options. Let’s take a look.

COBRA is a Good, if Pricey, Choice

Like the health plan you had through your old employer? You can keep it, if you don’t mind paying a little more for it. The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers who lose their healthcare benefits the right to choose to continue group health benefits for a limited period of time. Circumstances for COBRA include voluntary and involuntary job loss. So whether you quit your job or were fired or laid off you qualify for COBRA insurance coverage and can continue with your old employer’s health plan for a limited period of time.

COBRA is often more expensive than the amount that active employees are required to pay for their health coverage. The reason? The employer usually pays part of the cost of an employee’s plan and all of that cost now gets charged to the individual receiving COBRA.

When you elect COBRA, the insurance coverage must be identical to the coverage currently available under the plan for active employers. You are entitled to the same benefits, choices and services. Depending on the qualifying event for coverage, COBRA coverage is available for 18 to 36 months. If you quit or lose your job, you’re eligible for COBRA coverage for just 18 months. This can be a good way to continue with your current healthcare coverage, same doctors, same prescriptions, same medical services for a year and half. When your COBRA period ends, you will need to choose another healthcare option.

Health Insurance Marketplace Plans and Private Plans

For most Americans, if you leave your job for any reason and lose your job-based insurance, you are eligible to purchase a new health plan.

The federal government operates the Health Insurance Marketplace for residents in most states. But you have the option of buying health insurance from a private insurer too. And it won’t necessarily cost you more. It may even cost less. Twelve states and the District of Columbia operate their own marketplaces for healthcare. The states with their own health insurance marketplaces are California, Colorado, Connecticut, Idaho, Maryland, Massachusetts, Minnesota, Nevada, New York, Rhode Island, Vermont and Washington. If you live in any of these states, you would shop from your state’s own health plan marketplace for coverage. The same goes for the residents of the District of Columbia.

All other Americans who live in states without their own health plan marketplace can shop with the Health Insurance Marketplace through HealthCare.gov. With the Health Insurance Marketplace, losing job-based health coverage even if you quit or got fired qualifies you for a special enrollment period. A special enrollment period means you can buy health insurance outside the open enrollment period, which runs from November 1, 2020 through December 15, 2020 for 2020.

You have 60 days to enroll in a health plan and your coverage can start as soon as the first day of the month after you lose your insurance. When you fill out a Marketplace application, you’ll find out if you qualify for savings on your monthly premiums and out-of-pocket healthcare costs based on your income. You also will learn if you qualify for free or low coverage from Medicaid and the Children’s Health Insurance Program (CHIP). If you don’t qualify for subsidies, you’ll want to consider comparing individual and family health plans with private insurers.

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What About Going from COBRA Coverage to Another Plan?

If your COBRA is running out, you can enroll in a plan either during open enrollment or during a special enrollment period. But if you are ending COBRA early, you won’t qualify for a special enrollment period and you will need to enroll during the open enrollment period. Getting married and having a baby are other life events that qualify for a special enrollment period so if either of these apply to you and your spouse you won’t need to wait for open enrollment to apply for coverage.

Employer Health Plan Through a Spouse

If your spouse has a job with healthcare benefits, you may be able to be added to his or her health coverage. So check to see when that option would be available. Would you need to wait until the open enrollment period begins to add a spouse to a health plan? This is certainly a convenient option, since both family members would be sharing the same health plan. Just makes sure the spouse with the health plan has enough money in his or her checking account to absorb the additional healthcare costs each pay period.

Joining a Parent’s Plan If Under 26

If you are under the age of 26, you are eligible to be added to your parent’s health plan, thanks to the Affordable Care Act. So if the newly self-employed is a recent college grad or other young entrepreneur, they will have a few years of healthcare ahead of them on their parent’s plan. Both married and unmarried adult children qualify for this benefit. So don’t hesitate if you are younger than 26 and looking for healthcare to use this option, with your parent’s help, of course.

Signing Up for Medicare if Over 65

Are you a self-employed senior? Have you just left a job with healthcare benefits? Now is a good time to consider Medicare coverage. Most people age 65 or older are eligible for free medical hospital insurance coverage, Medicare Part A, if they have worked enough and paid enough Medicare taxes. Certain people younger than 65 can qualify for Medicare as well, including those with disabilities. You may want to check to see if you qualify for early coverage. Otherwise, you will have to wait until you are 65 for Medicare coverage.

Qualifying for Medicaid

In all states, Medicaid provides health coverage for some low-income people, families and children, pregnant women, the elderly and people with disabilities. In some states, Medicaid covers all low-income adults below a certain income level.

In states with expanded Medicaid programs you will qualify for Medicaid if you earn up to 138 percent of the federal poverty line. For 2020, the poverty guidelines are $12,760 for one person and $17,240 for two people. For larger families, check out this chart.

Check with the Medicaid program in your state to see if you qualify for coverage.

Association Health Plans

Association health plans work by allowing small businesses including self-employed workers to band together by geography or industry to obtain healthcare coverage as if they were a single large employer. The Writers Guild of America West and the Freelancers Union are among the associations offering healthcare plans to members. So check your memberships. Are you already a member of an organization offering healthcare? Would it be worth it to join an organization just for its healthcare benefits? Weigh the pros and cons and shop around for different association health plans. You may find one that fits your industry and your healthcare budget.

Short term Health Plan

Short term health plans are also called temporary health insurance or term health insurance. The aim of these plans is to fill in the gaps of health insurance coverage until you can find a more long-term solution.

A short term health plan may be right for you if:

  • You are unable to apply for health insurance because you missed open enrollment and you don’t qualify for a special enrollment.
  • You are waiting for your health insurance plan to start.
  • You are waiting for Medicare coverage to begin.
  • You are turning 26 and will be coming off your parent’s coverage.
  • You are between jobs or waiting for healthcare benefits to begin at your new job.

Short term health plans last from one month to 12 months depending on the state. Short term insurance plans do not cover pre-existing conditions and you must answer a series of medical questions to apply. So be prepared to give information on your medical status when applying for these plans.

Here’s an upside to these plans. You may get a quick response to your application. You could get coverage as soon as the next day. So consider these plans if you just need insurance for a short period of time. They may be able to fill the gap in your insurance coverage.

Private Insurance Plans

Getting a private insurance plan may appeal to you if you don’t qualify for low-income subsidies on the Health Insurance Marketplace. You qualify if you are turning 26 and can no longer be on your parent’s health plan, if you work part-time, are recently retired or are starting your own business. What are you looking for in a health plan? Are you healthy? Do you have routine medications that you take, a specialist that you like to see? Check to see how each of these scenarios would be covered under a private health plan. You are looking for the plan that best fits your medical needs at a good price. So shop around with SmartFinancial until you find the right plan.

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