Health insurance is a common perk for full-time employees. But where does that leave small business owners, freelancers, independent contractors, and other self-employed individuals? Trying to get health insurance as a small business owner is more difficult—since you’ll have to do all the research and work yourself—and in many cases, more expensive—since you won’t have an employer to help you manage the costs.
As a result, most small business owners end up with less coverage than they really need, or worse—with no coverage at all. So how can small business owners get better health insurance?
Why Health Insurance Is So Important
If you’re in good health or haven’t had a recent need for a hospital or physician, you might first think that health insurance isn’t truly necessary. You may end up paying hundreds of dollars a month for something you never tap into, right?
The truth is that insurance is a kind of gamble. There is a chance that you never use it, and in that scenario, you’d lose money. But there’s also the chance that you’re involved in an unpreventable accident, or develop a life-threatening condition, and with hospital bills that range in five or six figures (or even more), insurance is a practical necessity. For example, if you develop cancer, you’ll want to visit one of the best oncological centers in the country, like the Rush University Cancer Center or the Mayo Clinic. Having health insurance in this situation could prevent you from falling into years—or even decades—of paying off debts, and ensure you get the care you need to survive.
In addition to that, having health insurance today will help you avoid major tax penalties in coming years. For any month that you don’t have a qualifying insurance package, you’ll owe either 2.5 percent of your income or $695 per adult in your household who went without coverage, whichever is higher. There are maximum fees based on the number of people in your household, and there are some qualified exemptions, but it’s still in your best interest to opt for insurance.
Methods to Getting Better Insurance as a Small Business Owner
What can small business owners do to get decent coverage that isn’t terribly expensive? There are several options:
- A spouse’s policy. If your spouse is currently employed full-time and they have a health insurance policy through their employer, you may be able to sign up for it. Most spouses are qualified for health insurance programs, with a proportional increase in premiums. Be sure to check the quality of the policy before proceeding, as different employers offer different levels of coverage. One of the only problems here is that most employers’ health insurance programs have limited “enrollment windows” during which you’re allowed to make changes to your policy. This is for underwriting purposes, and to ensure individuals don’t sign on as a temporary way to deal with a health concern. Usually, this enrollment period lasts for at least one month out of the year, so depending on your timing, it could be difficult to join. As a plus side, this is one of the easiest options to manage; your spouse will continue managing their policy as usual, with a higher premium, but no extra hassle.
- A parent’s policy. Under the current legislation, it’s legal to join or remain under a parent’s health insurance policy until you’re 26. That doesn’t do you any good if you’re older than 26, but if you’re younger, keep in mind that this remains an option even if you get married, have a child of your own, live out of the home, and aren’t filed as a tax dependent. Your parents’ policy will need to be changed, of course, but it’s an available and relatively simple option if you’re young and don’t know what to do.
- The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a piece of legislation that mandates employers to continue an employee’s health insurance coverage after they leave, under certain conditions. If you’ve recently left your employer in pursuit of a career freelancing, this may be an available option to you; just keep in mind that this is designed to be temporary until you can find a more suitable long-term policy. What’s nice about COBRA is that it’s legally mandated to be an option to any employee who leaves for any reason other than a termination due to gross misconduct. After the departure, employers have 14 days to extend a formal “election notice” to an employee, which gives them the ability to sign onto COBRA. Your premiums will remain mostly the same, with an additional fee to cover administrative costs that hover around 2 percent. Your COBRA coverage will last 18 months, which should be more than enough time to make it to your next open enrollment window.
- The Affordable Care Act. Through the Affordable Care Act (ACA), you will likely be able to enroll in a new insurance plan from one of many different insurance providers. All of these are designed to be accessible to people who don’t have a healthcare option through their employer, so most of them will offer reasonable coverage for a reasonable premium. Be sure to compare and contrast insurance offers you find here, but you may want to act soon, as the Republican Party is currently attempting to repeal the legislation.
Like most other forms of insurance, you must apply for new coverage during the open enrollment period. However, there are some special circumstances that apply. For example, if you qualify for Medicaid or CHIP, both of which are aimed at low-income individuals, you may be able to apply for coverage immediately. You may also qualify for a special enrollment period due to a significant change in your life, such as losing qualified forms of coverage within the past 60 days, getting married, having a child, moving to a new primary residence, or seeing a drastic change in your income level.
- Local organizations. Finally, you may be able to find insurance through a local organization. Small business coalitions, freelancer organizations, and other employee benefits companies may be able to point you in the right direction or even provide you with a policy directly. Ask other small business owners in your area about their healthcare coverage, and see if they know of any worthwhile resources to tap.
Entering the Full-Time Workforce
If you find the options available to small business owners to be underwhelming, or if you want a more comprehensive, reliable, or inexpensive policy, you may consider joining the workforce full-time again.
Using the experience and contacts you cultivated as a small business owner, you could easily land a job doing what you do now. The problem, of course, is that you aren’t guaranteed to get comprehensive healthcare coverage just because you’re working full-time; still, on average, employers cover 83 percent of the costs of healthcare. That’s a significant amount to save, so if you’re making as much full-time as you would while self-employed, it’s an important move to consider.
What to Look for in an Insurance Policy
Just because you can get health insurance doesn’t mean it’s the best coverage available to you. As you may have guessed, however, there’s no such thing as one “right” form of insurance that’s appropriate for everyone. Before you enroll in any new policy, make sure you fully understand the following:
- First, you’ll need different types of coverage for different areas of health. General health insurance policies, for example, don’t frequently cover optometry services or glasses. Dental and vision insurance are usually offered as separate add-ons to your main coverage.
- Your premiums are the amount of money you pay to the insurance company every month, regardless of whether you’ve used any medical services. this is an amount of money you’ll need to budget for, and it’s unlikely to change often.
- Your deductibles will vary, depending on the plan you choose. This is the amount of money you’ll pay out of pocket when utilizing medical services. There are usually deductibles for things like office visits, medical equipment, and prescription medications.
- Metal levels. There are generally four “levels” of plans you can choose: Bronze, Silver, Gold, and Platinum. The quality of care you receive at every level is the same, but each level has a different cost distribution system you’ll need to pay attention to. For example, Bronze packages have lower premiums but higher deductibles.
- Network availability. Different plans also have different forms of network coverage, which means you may be limited in the doctors and facilities you can visit while still remaining covered.
The type of coverage you’re able to get will vary based on a variety of factors, including your current health, your age, your income, your risk factors, and how many people you’re trying to insure. Because it’s hard to compare apples to apples, be sure to look at plans from multiple different providers before you finalize your decision. Ultimately, you’ll want the best policy you can reasonably afford—and only you can determine what that means.