Many people dream of becoming self-employed, but aren't sure how they'll find affordable health insurance on their own. Laura covers six tips to find the best health coverage when you work for yourself or lose job-based insurance for any reason.
Tip #2: Estimate your annual income as closely as possible
I mentioned that you can get a subsidy, or government assistance, to cut the cost of health insurance. For 2016, it applies when an individual earns just over $47,000 or a family of four earns about $97,000 per year. Those who earn less get higher amounts of assistance than those at the top of these ranges.
If you earn less than the poverty level, which is currently $11,800 for an individual or $24,300 for a family of four, you may qualify for Medicaid or the Children’s Health Insurance Plan (CHIP).
The healthcare subsidy is a tax credit that you get to use in advance. It goes directly to your health insurance provider every month so you pay a lower premium.
These are free or low-cost state-run programs that may have slightly different names depending on where you live. Unlike Obamacare health plans, they don’t have set open enrollment periods, so if you qualify, coverage can begin any time of year.
The healthcare subsidy is a tax credit that you get to use in advance. It goes directly to your health insurance provider every month so you pay a lower premium. This is very different from other types of tax credits that you get only after filing your taxes for the previous year.
While it sounds great to have health subsidy money as quickly as possible, one challenge is that it’s based on how much you estimate earning in the following year when you’ll get coverage—not on last year’s income.
Since self-employment incomes can vary dramatically from month to month, the chances of knowing exactly how much you’ll earn is pretty slim.
To reconcile with the government, you have to square up each year when you file taxes. If you underestimated your income, you may have to return a portion of the tax credit that was already spent on your health insurance during the previous year. In other words, you may owe additional taxes that you weren’t expecting.
When you enroll in an Obamacare plan, you’ll have access to a marketplace account. That’s where you can update any changes to your expected income or family size that will affect your tax credit so it can be corrected.
Tip #3: Know the best places to shop
You probably remember the federal government’s infamous botched launch of healthcare.gov in 2013. That debacle made it difficult for many to shop for health insurance through the marketplace, known as the health exchange.
In 20 states there are state-run exchanges that operate on their own or in some level of partnership with the federal government. So depending on where you live, you can sidestep healthcare.gov altogether if you like.
While the federal and state sites are running smoothly now, they’re not the only options you have to buy health insurance when you’re self-employed or unemployed.
Here are 3 of the best places you can shop for health insurance from licensed professionals:
- Local insurance agents and brokers – are representatives or independent companies or in your local area. They typically don’t charge consumers because they earn commissions from insurance carriers. If you need help comparing health plans or submitting an application, having advice from an in-person local pro can really help.
- Online insurance brokers – are private companies like GetInsured and eHealth that allow you to compare plans on benefits and price. Many have customer service agents that can answer questions and help you choose a plan without charging a fee.
- Online insurance aggregators – are private companies like insuranceQuotes and netQuote that match you to the best possible options so you can compare multiple plans on benefits and price. Many have customer service agents that help you purchase a plan by phone at no charge.
No matter where you buy health insurance, your application for a subsidy gets routed through the federal government where they verify it and put your tax credit into motion.
See also: 7 Ways to Save on Healthcare and Fitness