Buying a self employed health insurance has become simpler, especially after the changes that has been witnessed over the last couple of years. Prior to the introduction of the Affordable Care Act, people without employer-subsidized health insurance were at the mercy of insurer providers. Especially, the one’s with preexisting conditions as they often find hard to get coverage or had to pay more. Plus, even healthy freelancers which could find affordable choices face discrimination from insurers in the form of annual or lifetime caps on their benefits or end their insurance plans over small details or technicalities.
Thanks to the Affordable Care Act, self employed Americans has many more protections today and many even qualifies for a tax credit, which subsidizes their coverage cost. However, health insurance for self-employed Americans continues to remain a significant expense. Thus, one needs to develop understanding of the ways the system works and how to make best of the system.
Few tips for people who wants to buy self employed health insurance
No Trump care coming any time soon
Despite President Trump initiatives the obamacare it’s not an easy to end the obamacare. First and foremost, they need to propose an alternative which will take time and not going to happen anytime soon especially in 2017. Secondly, it’s more likely to be a modification of existing and ACA is more likely to be kept.
Don’t focus on high premiums only:
High self employed health insurance premium mostly come as a shocker for the individual, especially the one’s which has recently left their jobs. The reason why employed people pay far less for their insurance is the fact that it’s subsidized by the employer substantially. Based on the estimates of Kaiser Family foundation, the average employee pays just $89 a month for single coverage while actual monthly premiums are $521. Thus, the employer is paying the remaining amount as part of their pay package. Further, when self-employed person sees the amount of money it will cost them to buy health insurance, there is general tendency among them to avoid it or postpone it.
One should never go without health insurance
- First of all, Americans will face tax penalty if they go without health insurance and don’t qualify for an exemption. The amount of penalty varies based on income level and place of your residence with average being $969 in 2016. Plus, more is your income higher is your penalty.
- Secondly, your out of pocket costs for medical treatment in case of medical emergency will be huge as compared to tax penalty you will be paying, while being uninsured. While the Affordable Care Act capped the amount of money insured Americans at $6,850 for an individual plan and $13,700 for a family plan, people without insurance have no such limit on their out-of-pocket costs. Uninsured Americans who suffer heart attacks or life-threatening accidents can easily owe tens or even hundreds of thousands of dollars in medical bills. Health insurance should not be bought with aim to pay less when you go to the doctor, but to insure catastrophic losses arising out of medical emergencies are taken care off.
Avail full subsidy on insurance plans
Self employed health insurance buyers can get their health insurance premiums lowered through smart shopping. The average health insurance premium of $396 is before tax credits, but the average American end up paying only $106 a month with a federal marketplace plan once tax credits are accounted and it’s very close to what an individual pays while working in a company.
However, these tax credits are available for people falling under certain income level i.e. earning less than 400% of the poverty level which is $47,520 for individuals and $97,200 for a family of four in 2016. In order to qualify for the tax credits or subsidy, one must buy a health plan available through your state’s marketplace.
Avoid short-term health plans
One way self employed health insurance buyers has been saving on their insurance premiums is by opting for short-term health plans, which typically has low monthly premiums of $110 a month, on average.
One should need to keep in mind that the short-term plans are not a substitute for traditional insurance.
- First, short-term plans don’t have to meet the standards required by the Affordable Care Act, which means they can discriminate against people with preexisting conditions, refuse to cover services like preventive care and prescription drugs, and put annual or lifetime caps on benefits.
- Secondly, short-term plans don’t meet Obamacare’s standards and aren’t actually considered insurance. Thus, you end up paying the tax penalty if you don’t have other minimum essential coverage.
Since, it doesn’t provide sickness coverage and you have to take care of treatment expense out of pocket at the same time pay the tax penalty. Thus, a loss making proposition for the self-employed individuals.
You can opt for skimpier Obamacare coverage instead
The best way to bring down the self employed health insurance premium is to opt for a higher deductible. The highest deductibles referred as catastrophic plans. If you do get sick, you will have to pay a lot more out-of-pocket and you can’t apply a tax credit to a catastrophic plan but if you’re relatively healthy, you can save a lot with lower monthly premiums to the tune of nearly 50% depending upon plan you compare with.
To qualify for catastrophic plans, you must be 30 years old or younger or you must qualify for a hardship exemption. People on these plans can get three primary care visits and other preventive services for free. But aside from that, enrolls must pay $6,850 out-of-pocket before they hit their deductible and before insurance starts to cover other health care services.
A smart move would be to put aside those monthly savings in an emergency fund or health savings account to cover emergency out-of-pocket costs.
Estimating income and tax credit:
The Obamacare tax credit is basically an advance tax credit based, which is based largely on how much you earn. This credit lowers the amount you pay in health insurance premiums every month. However, individual has to give estimate of their annual income at the time of enrollment. Thus, individuals need to reconcile their estimated income with actual income from a year, to ensure that they have got the right amount of tax credit.
Many self employed health insurance buyers end up with underestimating their income, which results in return part of their tax credit at time of tax filling. This is a fairly common problem among self-employed Americans.
Further, the top 5 Health Insurance Providers for buying Self Employed Health Insurance based on my experience is as follow:
- Blue Cross Blue Shield
- Kaiser Permanente
- UnitedHealth Group
Know some basic things about affordable care Act
- Exchanges or federal market place: Under the Affordable Care Act, states are required to either set up their own government-run marketplaces, also known as exchanges, or use the federal government’s marketplace. Exchanges are basically platforms on which private insurers can sell health plans, which are commonly referred as Obamacare plans, to Americans who don’t have coverage from somewhere else. You can find your state’s marketplace online at gov.
- Provides tax credits: The Affordable Care Act provides subsidies with aim to lower the cost of insurance. People who fall below a certain income threshold can get a tax credit that will cover part of the cost of their Obamacare plan’s premiums. On an average Americans with federal marketplace plans were able to reduce their health insurance premiums to the tune of 73% with the help of tax credits they received in 2016.
- Difficult to compare obamacare plans in advance: Comparing health insurance plans under obamacare is very hard as it’s difficult to compute the true costs plans in advance. This is primarily on account of the fact that you can’t imagine or perceive in advance how much you will be sick in an year as well as due to the fact that one have to part with money in different ways.
- First, there is monthly premium, which gets you access to the insurance plan.
- Second, moment you start your treatment you’ll also have to pay a preset out-of-pocket amount — your annual deductible — before the insurance actually kicks in.
- Thirdly, After spending entire deductible one still needs to pay either a set fee (your copay) or a fixed share of the cost (called coinsurance) for each service
- Four types of plans: Obamacare offers four types of plans based on “metal” ratings, which provide you an overview of your potential out-of-pocket costs. With the most generous platinum plans typically having the highest monthly premiums, while the most bare-bones bronze plans have the lowest premiums but high out of pocket cost.
- Platinum plans take care of 90% of your out-of-pocket costs
- Gold plans take care of around 80% of your out-of-pocket costs
- Silver plans take care of around 70% of your out-of-pocket costs
- Bronze plans take care of around 60% of your out-of-pocket costs