Tuesday Tips: Health Insurance for Freelancers

Yesterday, I posted a link to an article with tips for freelancers. Included was advice for the newly self-employed to get health insurance.

I wanted to follow up on that point, since health insurance is one of the biggest stressors for new freelancers. (Believe me, I know! I speak from personal experience!)

When you’re just starting out, it probably seems impossible to work the expense of health insurance premiums into your monthly budget. Here are some ways to keep your costs down while still protecting yourself — and your assets — in the event of a medical situation.

>> Does your husband or wife have insurance through his or her job? Find out if you can get added to your spouse’s policy. Even if their company won’t subsidize your costs, the overall level of benefits may be worth it. As a member of a group policy, you will not have to worry about preexisting conditions or continuity of coverage.

>> Investigate a high-deductible policy, with an HSA (Health Savings Account) on the side. When you have a high deductible policy, you enjoy significantly lower premiums — although you do have to pay out of pocket for many of your expenses, such as routine doctor’s visits and prescription meds. Be warned, these can add up quickly, especially if you have a chronic condition. But, at least you have peace of mind that in the event of a catastrophic injury or illness, you are fully covered. Plus, with an HSA, expenses paid out of your account are tax-deductible.

>> Were you recently laid off from a job that provided health insurance? If so, you should definitely check out COBRA. With COBRA, you and your dependents can continue on your previous policy for up to 18 months while you make your transition to the world of freelance. The advantage of COBRA? Continuity of care and no worries about pre-existing conditions. The downside? You have to foot the entire bill — to the tune of $1,000+ a month, for most Americans. There is a bit of a silver lining: If you were terminated from your job during this current recession (September 1, 2008 and December 31, 2009), you may be eligible for a significant premium reduction under the American Recovery and Reinvestment Act of 2009. To find out more, call 1.866.444.3272 to speak to a COBRA Benefits Advisor.

>> Compare rates. Spending an hour or two online comparing rates can save you hundreds of dollars a month in premiums. Check out eHealthInsurance or another online insurance agent. eHealth provides quotes from up to 160 health insurance carriers and lets you pick the benefit features most important to you and your family.

>> Talk to a broker. After I compared rates with a number of insurance sites, I ended up finding an even better offer through a broker. My advice: Select a broker who works with multiple companies — their rates will probably be more competitive since they aren’t invested in selling you one specific product. A broker can also help you figure out exactly what package of benefits makes the most sense for you (and your family).

>> Don’t forget about tax benefits. Speak to a licensed tax professional to find out if your premiums (and other healthcare expenses) can be used as a tax write-off. The answer will depend on how much income you bring in, how much you spend on health care, and what your legal business status is — are you a sole proprietor, a shareholder in an S-Corporation, or a member in an LLC? (Don’t worry if you have no idea what any of those terms mean… A one-hour meeting with an accountant can help you sort through the legal red tape to figure out which structure makes the most sense for your business model.)

>> Do you live in New York or New Jersey? If so, then look into insurance through the Freelancers Union. In November 2008, the group launched a new health insurance company to provide group rates for union members. If you are in one of those two states, it’s definitely worth exploring. According to the Freelancers Union website, the group is looking to expand the model quickly to other states — so stay tuned.

Are you a freelancer right now? What are you doing for health insurance?