Navigating the System: When You’re Self-Employed

self employed business keyboard Quality health coverage is expensive when you are self-employed. It can be frustrating and take a lot of time to find a plan you can afford that also fits your needs. Being uninsured is really not an option. In fact, the Affordable Care Act requires that you buy insurance or pay a penalty.

The success of your business depends on making the right decision about your health insurance. One illness, surgery, or series of tests can put you into personal bankruptcy.

Assess Your Needs

The first thing you'll want to do is assess your needs. There is no best plan. They each have their pros and cons. You can focus on the options that you need by asking yourself these questions:

  • How much coverage do I need?
  • What limit on my choice of doctors and hospitals am I willing to accept?
  • Am I okay with my primary care doctor referring me to specialists or would I rather be able to visit one on my own?
  • What is the co-pay for medicines?
  • Do I have access to other services, such as physical therapy or mental health care?
  • Do I have coverage for pregnancy and childbirth services?
  • What can I afford to spend each month?
  • How much am I willing to spend on healthcare costs, such as medical check-ups, preventive services, and care for pre-existing problems?
  • How much would I be able to pay if I had a health emergency or an unexpected health problem?
  • Would I be able to keep track of my medical receipts and file my own claims if I needed to?

Keep these answers nearby when you meet with an insurance agent or look through your options online. This can help you narrow down your options.

Compare Policies

People who are self-employed may have access to a group plan or they may have to buy an individual policy. Group health plans offer lower premiums because insurers spread the risk of claims over all members of the group.

Group plans are usually offered as part of an employee benefits package. People who are self-employed may be able to join one through a group purchasing alliance, such as a union, professional association, or membership in a social or civic group.

Some states and chambers of commerce offer group-rate insurance to the self-employed. The National Association of Insurance Commissioners provides links to each state's insurance departments.

If you can't buy insurance through a group, then you may need to buy an individual plan. Keep in mind that the out-of-pocket expenses and premiums are often much more expensive.

Do Your Homework

You'll first need to find out what type of health plan is best for you. There are two types of plans: indemnity or managed-care. Indemnity plans (or fee-for-service plans) offer more choice of healthcare providers. But they are usually more expensive and require members to do more paperwork. Managed-care plans have agreements with a network of providers. This means your out-of-pocket costs will be lower.

Managed-care plans include preferred provider organizations (PPOs), health maintenance organizations (HMOs), individual practice associations (IPAs), and point-of service (POS) plans. HMOs require members to be referred to specialists by primary care doctors. These plans are usually the least expensive option. PPOs let members see specialists in the network and without getting an approval. POS plans are more flexible (and more expensive). They offer members some coverage when referring them outside of the plan. IPAs are HMOs that contract with individual providers or an association of practices to provide health care services in return for a negotiated fee. The IPA pays physicians according to a fee schedule.

It can be hard to know where to start. You can ask friends and family members for the name of a trusted insurance agent. You can also find an agent through a professional organization, such as the National Association of Insurance and Financial Advisors, the National Association of Health Underwriters, or the Independent Insurance Agents and Brokers of America. Many websites also let you compare quotes from insurance companies.

The Affordable Care Act lets you shop around for insurance with their online Marketplace. This may trigger companies to be more competitive so that you can get the best price.

Compare Your Options

Next, you'll want to make sure the plan you are thinking of getting is licensed to sell health insurance in your state. You'll also want to read all the documentation for each policy to understand what is covered. Pay special attention to how each plan handles:

  • Physical exams and health screenings
  • Immunizations and other preventive care
  • Specialist care
  • Hospitalization
  • Emergency care
  • Prescription drugs
  • Vision care
  • Dental care
  • Mental health care
  • Substance use disorder services
  • Family planning services
  • Care for chronic health problems
  • Care for disabilities
  • Physical therapy
  • Home health, nursing home, and hospice care
  • Alternative health care, such as chiropractic care and acupuncture

Finally, look closely at the costs of each plan. Some plans offer lower premiums with higher deductibles and other out-of-pocket costs. Other plans are more comprehensive but have higher monthly premiums.

If you aren't able to buy a comprehensive health plan, you should get catastrophic health insurance as a last resort. These plans have high deductibles and low monthly premiums. They cover hospital stays, surgery, intensive care, and some diagnostic tests. They often do not pay for routine health care, medicines, mental health care, or pregnancy-related services. These policies are typically only available to healthy people without pre-existing health problems.

RESOURCES:

America's Health Insurance Plans
https://www.ahip.org

National Association for the Self-Employed
http://www.nase.org

CANADIAN RESOURCES:

Alberta Health
http://www.health.alberta.ca

Health Canada
http://www.canada.ca

REFERENCES:

About the Affordable Care Act. Department of Health and Human Services website. Available at: https://www.hhs.gov/healthcare/about-the-aca/index.html. Accessed October 20, 2021.

Finding health insurance. USA website. Available at: https://www.usa.gov/finding-health-insurance. Accessed October 20, 2021.

Health care reform frequently asked questions (FAQ). National Association of Insurance Commissioners website. Available at: https://content.naic.org/index_health_reform_faq.htm. Accessed October 20, 2021.

Health coverage if you're self-employed. HealthCare.gov website. Available at: https://www.healthcare.gov/self-employed/. Accessed October 20, 2021.

Last reviewed October 2021 by EBSCO Medical Review Board  Last Updated: 10/20/2021