Open Enrollment is nearly upon us and if you are one of the millions of self-employed Americans, you may be starting to explore your health insurance options ahead of the coming Open Enrollment period. In recent years, an increasing number of workers in the United States have gone into business for themselves, with more than 16 million Americans counted as self-employed in 2017, according to a report by MBO Partners, a figure which another survey by FreshBooks estimates could triple by 2020. 

Whether you are newly self-employed and are examining your health insurance options for the first time, or have worked for yourself for many years, understanding the different health plans, benefits, and savings options available to you is not always straightforward. To help you navigate the health insurance options open to self-employed workers, we have put together a guide with answers to some of the most common, and most important questions regarding your health coverage as a self-employed American. 

Am I self-employed or a small employer?

It may seem a simple question, but you need to be clear on whether you count as self-employed or a small employer before looking into health insurance coverage, as this may affect your eligibility for certain plans. Fortunately, the answer is relatively straightforward; if you work for yourself and have no employees, for example, if you are a freelancer, entrepreneur, or consultant, then you count as self-employed and in most cases will enroll through the Health Insurance Marketplace.

If you have any employees, even just the one, you may count as an employer and could be eligible to enroll in a health insurance plan on the Small Business Health Options Program (SHOP) Marketplace and provide health insurance coverage to your workers and yourself. 

Where do I enroll in a health insurance plan if I’m self-employed?

Open Enrollment on the Health Insurance Marketplace

Most self-employed people will enroll in a health plan using the federal Health Insurance Marketplace at HealthCare.gov or through their state’s exchange. Health plans on the Marketplace are divided into four metal levels; Bronze, Silver, Gold, and Platinum. Bronze plans generally have the lowest monthly health insurance premiums but come with higher deductibles, whereas Platinum plans have high premiums, but often offer more comprehensive coverage and lower deductibles. If your household income falls between 100 percent and 400 percent of the federal poverty level, you will likely qualify for one of the Affordable Care Act (ACA) subsidies, such as cost sharing reductions or premium tax credits. 

Residents of the states below will need to enroll in an individual health plan (or sign up for small business health coverage) through their state’s website rather than through the federal government Marketplace. States with their own health insurance marketplaces are:

• California

• Colorado

• Connecticut

• District of Columbia

• Idaho

• Maryland

• Massachusetts

• Minnesota

• New York

• Rhode Island

• Vermont

• Washington

Small Business Health Options Program (SHOP)

Some states consider self-employed individuals to be “groups of one,” which means if you live in one of these states, you may be able to enroll in a health plan using the Small Business Health Options Program (SHOP). In most cases, you are not eligible for group health coverage through SHOP if your only full-time employee is your spouse or another family member. States with provisions for groups of one are: 

• Colorado

• Connecticut

• Delaware

• Florida

• Hawaii

• Maine

• Massachusetts

• Michigan

• Mississippi

• New Hampshire

• North Carolina

• Rhode Island

• Vermont

• Washington

Medicaid & CHIP

You may be eligible for free or low-cost health coverage through Medicaid or the Children’s Health Insurance Program (CHIP) if your household income falls below a certain threshold. Certain states have expanded Medicaid coverage, which entitles residents to health insurance based solely on their income. 

Under the ACA, Medicaid was expanded to encompass nearly all adults or households whose income falls below 138 percent of the federal poverty level. However, a 2012 ruling made this optional for states, and as of June 2018, there were still 17 states without expanded Medicaid programs.

Catastrophic health plans

Catastrophic health plans are high-deductible health plans available to anyone under 30 years of age. You may also be eligible for a catastrophic health plan if you are over 30 and qualify for a hardship exemption. Criteria for a hardship exemption include, but are not limited to: serious financial difficulties (such as bankruptcy), the death of a family member, homelessness, medical expenses resulting in serious debt, and unexpected increases in expenses because you provide care to an aging, ill or disabled family member.

Relatively few people sign up for catastrophic health plans; in 2017 less than one percent of people who enrolled in exchange health plans chose this option. Despite having high deductibles, you will not be able to use a health savings account (HSA) alongside a catastrophic health plan. 

Am I required to have health insurance if I am self-employed?

As part of the strategy to improve access to affordable healthcare, the ACA made it a legal requirement for individuals to have health insurance, introducing a tax penalty called the individual mandate for those who could afford health coverage yet failed to enroll. However, the individual mandate was abolished by the federal government, which means that from 2019 onwards you no longer face a fine for failing to have an ACA-compliant health insurance policy. Currently, there are only two exceptions to this, Massachusetts and New Jersey, both of which have a state-imposed penalty.

What if I leave my job to become self-employed outside of the Open Enrollment deadlines?

Leaving your job to become self-employed is a big step and loss of health insurance and other benefits is often a serious concern. This year, the Open Enrollment dates in all states using the federal Marketplace are between November 1, 2018, and December 15, 2018, and those who do not sign up during this window may be left without cover. 

However, if you lose your job-based health coverage after leaving your job to become self-employed, you do not have to wait for the next Open Enrollment period to sign up for individual health insurance as you will qualify for a Special Enrollment Period (SEP). You are eligible for a SEP if you or anyone in your household lost qualifying health coverage in the past 60 days, or expects to lose coverage in the next 60 days. Note: If you lose coverage as a dependent, you do not qualify for a SEP.

Can I get group health insurance if I am self-employed?

Group health insurance is a single policy issued to several individuals and is typically used by employers to offer health insurance to employees and their dependents. Small employers, categorized as businesses with between two and 50 employees (owners are also counted as employees), are guaranteed enrollment in a group plan under the terms of the ACA. 

In some states, self-employed individuals are also guaranteed group coverage as they are categorized as a “group of one” (see the list above for more details). If you are self-employed and live in one of these states, you may be eligible for group plans, even if you have no employees.

How do I estimate my annual income?

When enrolling for self-employed health insurance, you will be required to estimate your expected annual income for the plan year (not the previous year), but this may be tricky if you are self-employed and have sporadic or unpredictable income. Calculating an accurate estimate of your household income is important as you may be eligible for premium tax credits and other savings and tax deductions when enrolling in a health plan on the Marketplace. Savings on the Health Insurance Marketplace are based on your estimated net income, or “profit”. You will need to include:

• Your net income/profit (you can deduct business expenses from this figure)

• Income for everyone in your household who is required to file a tax return, including those who do not require health coverage 

Remember, certain expenses (other than business expenses) can be deducted from your income, which may increase your premium tax credit eligibility. These include:

• Alimony payments

• IRA contributions

• Educator expenses (for example, if you are a teacher and pay for supplies yourself)

• Moving expenses (if you need to move much closer to where you work)

• Student loan interest

• Tuition costs

Tip: Update your Marketplace applications as soon as possible if it looks as though your income will be substantially higher or lower than your estimate; you may be eligible for further premium tax credits if your actual income is lower, but you may also be required to repay some credits if you have a more profitable year than expected. 

Which health plan is right for me if I’m self-employed?

Whether you are self-employed or get health coverage through your job, it can be complicated working out which is the most suitable plan for you and your dependents. These simple tips can help you figure out what you need from your health insurance and establish which plan is best-suited to your needs.

• Calculate the annual cost of your healthcare - look at how much you spent in previous years and make sure you factor in any new medical costs you expect to incur, for example, if you recently started taking a new prescription medication or began a new course of treatment. 

• Assess your own finances - health plans with lower monthly premiums may be appealing at first, but you need to ensure your finances can handle the deductible and any copayments or coinsurance. If your income as a self-employed worker is unpredictable, you will need to weigh up your options carefully, balancing getting sufficient cover with ensuring you can afford your health insurance premiums and out-of-pocket expenses.

• Check what is covered by your plan - health plans vary, so you will need to check what benefits are included in the plan you select. Some plans will have much better coverage for services such as mental health treatment or physical therapy, so give some thought to what services you and your family may require in the coming plan year.

• Compare health plan networks - if you regularly see the same physician or treatment provider, make sure they are in-network when selecting a plan, otherwise out-of-pocket expenses may be higher than expected. 

• Check the formulary - if you or your dependents take any prescription medication, check to see whether this is included in your insurance company’s formulary. You will find your insurance company’s formulary on its website, as all insurers are legally required to include a link to an updated list.

Remember, there are other ways to reduce your healthcare expenses, even if you sign up for great health coverage during this Open Enrollment period. If your medication is not included in your insurer’s formulary, you can find the lowest prices at pharmacies near you using ModRN Health. You may even discover purchasing medication using your discount card works out cheaper than your copayment. We also have great prices on supplementary health products, and with our unique Rewards program, you can earn while you save and reduce your overall healthcare costs.

Keep an eye on our blog for more articles, information and details about this year’s Open Enrollment!