How to Get Health Insurance if You’re Self-Employed

Shopping for health insurance if you’re self-employed is a lot like purchasing other types of insurance. There are many terms to understand, coverage types to compare, and options for where to buy a policy.

But buying health insurance feels different than searching for auto insurance — after all, both your health and financial well-being depend on the coverage you choose.

After quitting my job in 2012, I purchased my own health insurance. Here’s my experience mixed with information for picking a policy.

Where to Find Health Insurance

The good news about finding your own health insurance is there are a variety of insurance providers, plans, and places to research and choose a policy.

In my search, I explored a few of the options below and ultimately chose a plan from eHealthInsurance.com.

Here are common ways to find health insurance if you’re self-employed.

Shop online for personal plans

You can shop for health insurance online with websites like eHealthInsurance.com. These sites are basically digital brokers where you’ll find plans from various providers with several policies to choose from. You can filter results based on your needs and easily compare the costs and benefits of individual plans.

Use a broker

If you’d prefer to work with an actual person, an insurance broker may be a good option.

Brokers can find policies that meet your particular needs, and may better help you navigate the complicated health insurance system if you have preexisting conditions.

Brokers are typically paid by the insurance companies, so you won’t have to pay extra to work with one.

Search for a qualified broker that will actually help you find coverage, since the experience varies from agent to agent. The National Association of Health Underwriters offers a search tool for agents they’ve certified.

State plans

Health insurance options vary from state to state. You can find out the best way to acquire insurance where you live using HealthCare.gov’s tool. This will tell you what options your state offers, which may include additional options for those with preexisting conditions.

Starting in 2014, you’ll be able to buy insurance through state insurance exchanges thanks to Obamacare.

Group buy

Certain trade organizations and professional groups, like AARP or the Freelancers Union, offer access to health insurance. These organizations offer group rates on insurance that may cost less than an individual policy.

I wasn’t eligible for health coverage from the Freelancers’ Union due to my location. I checked the plans offered in New York state anyway, and at $225/month with a $10,000 deductible, it wasn’t a better deal in my case.

COBRA

If you’re newly self-employed, you can use COBRA to keep your employer’s insurance for up to 18 months. The downside: COBRA isn’t cheap, and the insured must pay up to 100% of the plan’s premiums plus a 2% administrative fee.

Because of this, only about 10 percent of those eligible enroll in the program according to NPR. I opted to skip COBRA when I found my personal plan for about half the cost with the same benefits.

A part-time job with benefits

Some companies offer health insurance to part-time employees. Starbucks, Trader Joe’s, and many others make the list of employers that offer benefits to part-timers.

Compare the Key Factors

Despite the wide array of choices, the bad news is that buying health insurance might not be cheap or provide much coverage. Costs vary depending on the state you live in, your age, and your health.

After weighing all the costs and options, I settled on a plan that costs $110 a month and comes with a $5,000 deductible. It’s a fairly bare-bones plan that won’t offer much unless my health care costs skyrocket due to injury or illness.

There are many different factors that determine how much you’ll pay for your health care. Some common coverage terms and options to compare include:

Premium. This is what you pay your insurance provider every month for access to your coverage. In general, the higher the premium, the lower the deductible.
Deductible. This is how much you must pay out-of-pocket before the insurance will cover any costs. Generally, it's advised that your deductible doesn't exceed what you're able to pay out of pocket for insurance.
Co-insurance. This is how much costs are shared between yourself and the insurance provider after the deductible is covered. Plans offer various ratios like 80/20, meaning your insurance covers 80% while you must pick up the other 20%.
HSA-eligible. Not all plans work with a Health Savings Account (HSA), which allows you to pay for health care with pre-tax dollars. While the tax benefits are a plus, the typical downside of HSA-eligible plans is higher premiums or deductibles.
Office visits. Plans vary widely for coverage and co-pays of office visits. If you visit the doctor a lot or not at all, select a plan accordingly.
Maximum out-of-pocket costs. This is the most you can pay each year with your policy. Your monthly premiums don't count towards this total.

Many plans allow you to add prescription or dental coverage for an extra fee. I opted for prescription coverage since it was inexpensive, but didn’t go for dental since the plans didn’t offer enough value to me for the premiums.

Questions to Ask

Aside from comparing the facts, you’ll want to ensure the coverage works for you. Everyone has different needs when it comes to health insurance policies, and certain plans benefit those who need certain coverage.

Typical questions to ask yourself include:

What’s covered? You might be surprised what’s not covered by your plan, including visiting a particular physician. Find out before you purchase a plan rather than learning the hard way later.
How often did you visit the doctor last year? Since plans differ on co-pays for office visits, you’ll likely benefit from different options if you visit the doctor often compared to if you almost never go in.
How much did you spend on health care last year? This matters for selecting the appropriate deductible and plan benefits, like prescription coverage. By looking at what you’ve paid before, you can get a better idea of what you’ll pay with your coverage under your new plan.
What type of coverage? Typical options include PPO, HMO, HSA-eligible, and indemnity plans, each of which offers different benefits related to the specific doctors and treatments you can receive.
Out-of-network care? What costs will you face for out-of-network coverage? It’s important to know if you travel outside of your region and provider’s network, as you may have to pay more than usual.

If you're rejected...

Luckily, I was approved for my policy on my first try. But others might not be so lucky.

For now, it’s possible you might not be able to buy health insurance at all. Depending on state laws, insurance providers may be able to deny coverage based on preexisting conditions.

This will change in 2014 with Obamacare. Insurers won’t be able to deny coverage based on preexisting conditions. Small businesses and individuals will have access to state marketplaces that are supposed to make shopping for insurance easier, too.

In the meantime, you’ll have to rely on options like state pools that cover the uninsured or simply wait it out until the new law goes into effect.