The ins and outs of affordable health insurance for the self-employed

By Maggie Zahm

Finding affordable health insurance is one of the biggest challenges facing those working independently. Since contractors and freelancers do not typically have an employer offering cost-effective benefit options, it is up to the individual to find and pay for their own insurance. While there are a variety of services, it is often hard to find a package that you qualify for, that fits your needs and is affordable. Until the new Small Business Health Options Program (SHOP) Act is passed (see below for more details), the following is a list of health insurance options for the self-employed.

Group Insurance

This is by far the best health care coverage plan available. Because members are included under one “master policy,” which has many contributors, the policy provides maximum coverage at minimum cost. The plans typically cover regular doctor’s appointments (less a co-pay that the individual pays upon the visit) and hospital treatment for accidents. Some plans also offer vision care and/ or dental work and partial prescription costs. Members also do not have to participate in any medical exams or answer any health questions before they purchase this type of insurance because everyone pays the same rates, even if they have pre-existing conditions or chronic problems. Rates for group insurance do not rise even if claims are made.

The problem that arises for freelancers who desire to have this type of plan is that group insurance is only issued to large groups of people. Most often, people subscribe to this coverage plan through their employer, and rates are taken directly out of their paycheck. If a freelancer has a spouse that is covered under this plan, the best option for them is to try to get on the plan as well. Also, labor unions, churches and other service groups are sometimes able to obtain group insurance rates for their members.

Insurance through an association or chamber of commerce

Another possible healthcare option for freelancers is that they may be able to obtain coverage through an association or their local chamber of commerce. Although these types of plans are not actual group policies, they still have some related benefits because they are classified as pooled risk policies. This option can still be affordable if the members are young, do not have any serious health problems, and have a low risk of accident. However, rates can change as a the result of a claim.

Coverage through the State

Some states may offer medical insurance benefits programs. This option is typically not a good choice for those looking for quality, affordable health insurance. State coverage does not fully cover preventative care options, like regular doctor appointments, and it is often limited with prescription coverage. If someone becomes seriously ill or injured, this plan will prevent financial ruin, but the costs will add up quickly for smaller, more common health issues.

Coverage through the state may be worth exploring if you have a low income. State coverage programs often have income limits because they are intended for those who cannot afford to consider other options. If you feel this plan may be for you, make sure you have extra money in the bank to pay for routine doctor appointments, prescription costs and partial hospital bills if something serious were to occur.

Individual Coverage

This option is notably the worst option for those looking to purchase health insurance. Members buy their plan directly from the insurance company at a premium rate. It might even be completely impossible to find something you can afford if you have pre-existing conditions or are in poor health.

SHOP Act

Recently, a new health insurance option was proposed. The Small Business Health Options Program (SHOP) Act seeks to “amend the Public Health Service Act to establish a nationwide health insurance purchasing pool for small businesses and the self-employed that would offer a choice of private health plans and make health coverage more affordable, predictable, and accessible." This legislation would be implemented in 2011 and offer tax incentives to encourage states to reform insurance markets for small businesses and “encourage the development of state purchasing pools backstopped by a voluntary, nationwide pool.” Overall, the act would provide a more efficient way for insurers to market their health plans and for employers and employees to enroll in them. Also with this act, administrative costs for the premiums would drop drastically. Keep an eye out for updates with the SHOP Act, as this may benefit you directly. Check out http://www.opencongress.org/ to view the bill, track and contact Congress members and stay up to date with any new information.