Many Americans dream of owning their own business. Debatably it’s the embodiment of the American dream. There’s not much that beats the unique satisfaction that comes from being your own boss. But like a lot of things, there are significant risks in making the jump to self-employment, especially if you’re coming from a job with good benefits.
But the problem is that buying an individual health insurance policy still costs an arm and a leg. In fact an individual insurance plan might cost you up to four times as much as you paid for your employer sponsored health insurance plan. So what can you do to get self employed health insurance that won’t break the bank? Well let’s take a look at some options:
Affordable Care Act health insurance marketplaces
A major component of the Affordable Care Act is the creation of health insurance marketplaces in every state. These online marketplaces will make it easier for you to find a health plan that suits your budget and needs.
A good way to think of the marketplace is like the Travelocity of health insurance plans. You can simply visit your state’s online marketplace and compare plans based on premium price, benefits, quality, and other features you’ll need to make a decision. You can also find out if you qualify for tax credits to help pay for insurance.
Under the ACA, all plans sold at a state’s marketplace cover the same core set of ten “essential health benefits.” The new law also prevents health insurers from denying you coverage or charging you more because of a pre-existing condition.
The bad thing about the insurance marketplaces is that they’re not an immediate option. At the moment they’re all scheduled to open for business on Oct. 1, 2013 with coverage beginning on Jan. 1, 2014. For many though, it could be worth the wait because of the tax credits available to applicants.
Become part of your spouse’s insurance plan
If you want to remain insured while setting up your own business, you likely won’t find a better deal than joining your spouse’s employer-sponsored health insurance plan. Your spouse will have to pay more for the family coverage but it will still be cheaper than any plan purchased individually.
However it’s worth noting, that you typically can’t join your spouse’s plan anytime you want. Most plans won’t let participants add a relative until the open enrollment period. So check with your spouse’s human resources department and plan accordingly.
Enroll in COBRA
When you leave your job to start a business, you can continue to be insured through your old employer’s plan under the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA allows you and your dependents to stay on your old health insurance plan for up to 18 months after leaving a job.
Sounds like a good deal right? Well the problem is though, that you have to pay for the entire cost of the plan on your own, which also comes with a 2% administrative fee. That means the amount you pay for COBRA can be quite a bit. Because bear in mind that previously you only paid a percentage of the full cost of your health insurance.
Also, COBRA does not offer flexibility in plan choice. You get the exact same plan you had when you were still an employee. You’re not allowed to change options after you leave your job to save money. A way to get around paying through the nose for COBRA coverage is to switch to a more affordable plan during the open enrollment period before leaving your job.
Medicaid is a federally sponsored program that provides health insurance to low-income individuals and families, children, pregnant women, the elderly, and people with disabilities. Qualification for the program is based on income and family size. This is certainly a viable option for those who cannot afford to pay for health insurance on their own.
Beginning in 2014, Medicaid eligibility will be expanded under the Affordable Care Act. Those who earn up to 133% of the federal poverty line, including adults without children, may qualify for coverage. So, if you previously didn’t qualify for the program, you might next year. Be sure to visit your state’s Medicaid website to find out where you stand on the new qualifications.
Unfortunately though, the Medicaid expansion will not be available in every state. A U.S. Supreme Court ruling on the ACA in 2012 allowed states to opt out of the expansion. So far, 26 states have said they will support the expansion.
Health insurance through a union or professional organization
The reason why big businesses are able to get lower health insurance premiums than their smaller counterparts is because the risk is spread across more people.
You don’t get the same deal when you buy health insurance on your own. A way to get cheaper group rates if you’re self-employed, is by joining unions, alumni associations, local chambers of commerce, or bar associations that offer their members health insurance.
Find out whether the membership organizations in your area offer health insurance options. Individual and family plans may be available. You will need to pay annual or monthly fees, but the discount you’ll get may be well worth it.
Health insurance brokers
If you are lost in all the confusion of finding your ideal health insurance plan, a way to clear everything up for you might be to work with a health insurance broker. They are experts at what they do and can lead you to the plan that suits you best. You’ll likely have to pay a service fee but it could be worth it for the face to face advice you can get from these guys.
Oftentimes, you just have to submit the required materials, sign a few papers, and they’ll take care of the rest for you. How’s that for convenience?
For years self-employed Americans didn’t have very many options for health insurance. The price was always too high and the benefits too few. Often they were just flat out denied coverage whether because of pre-existing conditions or something else.
Fortunately, things are looking up for self-employed individuals starting next. The Affordable Care Act will finally bring reforms to help them get the coverage they badly need. The ACA promises to bring costs down and raise the standard of coverage. However, it you can’t wait until the changes take place, the options discussed above will definitely help you.
Michael Cahill is Editor of the Vista Health Solutions blog. He has a degree in Journalism from SUNY New Paltz and previously worked as a reporter for the Poughkeepsie Journal and an editor for the Rockland County Times. Follow him on Twitter at @VistaHealth and @ElectronicMike