If there is anything holding you back from taking the leap between being an employee and a freelancer, it could be your company’s health benefits. While the change of law in 1986 meant workers could carry on with the health benefits provided by their company if they resigned, this isn’t necessarily an affordable answer.
As well as paying a proportion of your wages to the health plan, your employer would likely have been making a contribution, so when you have to
pick up the total payment towards this yourself, it can be quite expensive; you might need to drop down to a lower cost plan with fewer benefits to make it affordable. However, even if this option is taken up, it only allows your previous health plan to be extended for an 18 month period, so is not a long-term solution. Therefore, what are the options for affordable health insurance for freelancers?
Your local Chamber of Commerce
The Chamber of Commerce is an association that promotes and protects local businesses, including freelancers. They usually offer health plans for small businesses with two or more employees, though they also provide them for individuals who work alone. The health plans on offer can vary from one association to another, with some providing a standard plan and others offering some choice.
Reduced rates through a freelance organization
Part of the reason that you pay less for your health insurance when you are employed by a company is that they receive a group rate. However, it is still possible to receive such a discount through an association aimed at freelancers. One example is the Freelancers Union which is able to provide group discounts for those working freelance who are based in New York, New Jersey and Connecticut; though they can still provide health plans for workers in another 30 states. The National Association for the Self-Employed provide various discounted health plans and also have an arrangement where the health insurance premiums paid and expenses for non-insured medical costs – such as visits to the doctor, prescription and over the counter medications, as well as vision care -are fully deductable against tax. These two associations cover all freelancers, but there might well be one specific to the industry area in which you work, for example the National Writers Union for freelance writers.
Use an insurance broker
An insurance broker can liaise with insurance companies for you and is meant to find you the best price for your circumstances. This option is probably suited to someone whose current medical conditions make it more difficult for them to obtain health insurance. Always thoroughly research brokers and ask for references to track down one that is reputable.
Take your chances
Lower monthly premiums can be obtained if you are prepared to pay a higher amount towards your own medical costs when you need to claim; for example you would pay say the first $5,000 and your insurer would then pay the remainder. This might sound like a bit of a risk, but it’s always preferable to be covered to some degree than not at all and consider it this way, isn’t it better to have to pay the first $5,000 than have to pay the full $35,000 after a serious accident? You might also be pleasantly surprised when you compare the various low rate premiums available, as some cover more than you think. If you go with this option, opening a Health Saving Account is a good idea, as this will help you to save the money that you would need to pay towards the first proportion of your medical expenses. You are currently able to contribute a maximum of $3,050 as an individual or up to $6,150 as a family each year into this account; contributions are also free from tax deduction.
Everyone’s situation is different, so each option will be suited to some people more than others. However, it doesn’t matter which option you pluck for, be sure to do your homework to ensure that all you think is covered by the plan actually is.