According to the Kaiser Family Foundation, approximately 14.4 million people purchased their own health insurance through the individual insurance market as of the first quarter of 2018.1 These individuals may be self-employed, work as independent contractors or own small businesses; others may work part-time or seasonally. Whatever the reason, they lack access to a comprehensive, employer-based benefits package.
If you fall into this category, you may want to purchase insurance to help pay for healthcare on your own. Consider major medical health insurance or another form of minimum essential coverage as your starting point and build from there.
ACA coverage options for those with no employer benefits
Job-based major medical health insurance plans are considered minimum essential coverage but what if you’re a freelancer, contract worker or self-employed individual without access to an employer’s health insurance plan? The ACA also considers the following to be minimum essential coverage2:
- Individual major medical insurance purchased from the Health Insurance Marketplace (i.e., HealthCare.gov or a state-based exchange)
- Health insurance purchased in the private market (e.g., directly from an insurance company)
- Most Medicaid
- Medicare Part A coverage
- Medicare Advantage
- Most types of TRICARE coverage
- Children’s Health Insurance Program (CHIP)
- Read more at IRS.gov
The Affordable Care Act’s tax penalty is no longer in effect3, meaning beginning with tax year 2019 you won’t owe a federal tax penalty for not obtaining ACA-qualifying major medical insurance.
Even so, if you are a self-employed individual, freelancer or contract employee who needs long-term coverage, you may want to consider major medical insurance (or another form of minimum essential coverage for which you qualify).
Why? Major medical insurance is guaranteed issue, fulfills all ACA requirements (e.g., essential health benefits, no-cost preventive care) and provides the most comprehensive healthcare benefits.
Plus, when you buy major medical insurance from HealthCare.gov or a state-based exchange, you may qualify for a premium tax credit to help lower your monthly premium payments. Use our subsidy calculator to estimate yours.
Alternative health insurance for the self-employed + others without employer benefits
If, for some reason, you have a brief gap between major medical plans, need coverage outside of an open or special enrollment period, or decide that major medical insurance isn’t right for you, then you may want to consider an alternative health insurance option. Although the ACA’s tax penalty is no longer in effect as of January 1, 2019,4) you could still be penalized for going without minimum essential coverage in 2018.
Alternative health insurance plans are available in the private market. They are not minimum essential coverage, do not qualify for subsidies and are not bound to ACA requirements. That said, they can be an attractive option for some self-employed individuals, freelancers and contract employees looking for affordable health insurance that helps with unexpected medical expenses.
Short term health insurance
Let’s say you’re a seasonal, temporary or holiday employee. You probably won’t have access to health insurance benefits through the business you work for. The law does not require companies to offer coverage to part-time employees—those who work fewer than 30 hours a week or are seasonally employed for fewer than 120 days during the tax year.5
Short term health insurance can be an insurance option for a seasonal, temporary or holiday employee because it provides temporary coverage for 30 to 364 days depending on your state (not all states allow for a 364-day duration). Short term plans are designed to provide assistance with out-of-pocket medical expenses and include a range of benefits for healthcare services related to hospitalization, emergency room visits, ambulatory services, doctor office visits, surgery and more.
You can buy short term health insurance year-round. Apply and enroll quickly online, and then if approved, begin coverage as soon as the next day. Plus, you’re able to customize coverage to meet your insurance needs and budget by selecting your policy length, deductible, coinsurance and more, since your premium cost will vary depending on the amount of benefits selected.
If you have a pre-existing condition that isn’t covered, you’re not eligible for short term health insurance due to your health history, or you are eligible for an ACA subsidy when purchasing major medical insurance through an exchange, then you may want to enroll in a major medical plan instead, even if you’re a temporary employee.
Health insurance bundles
A bundle is another health insurance option for independent contractors, freelancers and temporary workers. Short term insurance tend to have higher maximum benefit amounts, they are designed to help with larger, more catastrophic claims. Hospital indemnity insurance offers set benefits that can help with smaller expenses at certain durations. With this in mind, you may want to consider a bundle that includes both types of policies. Some states do not allow you to purchase hospital indemnity insurance unless you also have major medical insurance.
Supplemental health insurance for those with major medical plans
Major medical insurance is the most comprehensive health insurance because it must comply with the Affordable Care Act to ensure access and affordability. Still, no health insurance policy will cover everything.
Even with major medical insurance or other minimum essential coverage, you will still be responsible for out-of-pocket expenses that may include your plan deductible, coinsurance and copayments, as well as non-covered medical expenses such as experimental treatment and out-of-network care.
Supplemental health insurance policies can provide self-employed individuals, contract employees, freelancers and others with additional benefits to help mitigate these kinds of medical expenses.
Hospital indemnity insurance
Hospital indemnity insurance is a year-round alternative coverage option. Hospital plans are fixed-benefit indemnity coverage that can help with certain expenses related to hospitalization, surgery and critical illnesses. They provide specified, fixed-dollar amounts for covered hospital services and durations.
What does that mean? The amount your hospital plan pays in benefits will match what is stated in your hospital indemnity policy, regardless of what your healthcare provider bills. The amount your hospital indemnity policy pays could be per day, per week, per month, per visit or per event, depending on the benefit that applies.
So, for example, a policy may include an intensive care benefit that pays $3,000 per day, up to a maximum amount of days; you would receive $3,000 per day you were in intensive care up to that limit.
Hospital plans may also include benefits for ambulance services, chemotherapy, radiation, preventive care, X-rays and more, depending on your policy and any optional benefits you select.
As with all insurance policies, your premium cost will vary depending on the amount of benefits selected. As we mentioned above, depending on where you live you may not be able to purchase hospital indemnity insurance unless you already have a major medical insurance policy.
Medical gap insurance
Medical gap insurance is supplemental coverage that provides a lump-sum, fixed-cash benefit when you experience a covered accident or illness. You choose how to use this benefit.
Supplemental benefits can not only be used toward your plan deductible or other out-of-pocket medical costs, they can also help replace lost income and be used for house payments, groceries, childcare and more. These plans may be purchased year-round.
Add-ons to Health Insurance
Full-time employees with access to job-based benefits often have a chance to enroll in additional benefits through their employers. As an independent contractor, freelancer or temporary worker, you may want to consider these add-ons to health insurance to help with out-of-pocket medical expenses.
Most major medical insurance plans do not provide benefits for dental services that are not medically related. Dental insurance provides benefits for preventive care such as professional cleanings and exams, basic services such as fillings and root canals, and major services such as bridges.
Because dental insurance is prevention-focused, it often covers preventive care at a higher reimbursement level (sometimes even at 100%). Some dental plans even include vision benefits or vision discounts.
If you work outside a traditional, full-time employment setting, your schedule may be a bit different than 9 to 5 and you probably don’t get paid time off for sick days. A telemedicine package can provide you with convenient access to telehealth services for minor ailments such as cold, flu, ear infections, urinary tract infections and more.
Telemedicine offers 24/7 access to board-certified doctors. You can speak with them from the comfort of your home office (or anywhere else you’ve got cellular or Internet connectivity). No networks. No travel. No waiting rooms. Telemedicine is not insurance.
Rx discount card
A prescription drug discount card can help reduce what you pay out of pocket, oftentimes between 20% and 80% off the retail price of prescription drugs.6
This is a standalone product that is available year-round. And it’s simple to use: You present it at a participating pharmacy to access your discount. Discount drug cards are not insurance.
Summary + next steps
These are just a few options available to you as a freelancer, self-employed individual, or temporary seasonal worker. As you shop around and compare these coverage possibilities, you’ll want to consider your health history, monthly and annual budget for medical care, the length of time for which you’ll be buying your own health insurance, and your anticipated medical expenses in the year to come.
If you need help making decisions about healthcare benefits, consult with a health insurance producer.
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