After years of choosing between sky-high premiums and going without any health coverage, millions of freelancers will benefit from the Affordable Care Act because of expanded eligibility requirements, new public insurance exchanges and improvements to cheaper plans.
Independent workers have always been able to shop for coverage in the individual insurance market, but many were pushed into pricier high-risk pools if they had a pre-existing medical condition. “This is a godsend for freelancers,” says Bryce Williams, managing director of Exchange Solutions for Towers Watson, a benefits consultant. “The problem before was that insurers could cherry pick you based on your health.”
But with the new options come new complexities. So where to start? Before turning to public and private exchanges, freelancers should check if they qualify for coverage anywhere else, says Williams. Some younger workers who are freelancing after graduating from college might qualify to stay on their parents’ insurance plans if they are under age 26. They will need to be mindful of what doctors and medical providers are considered in-network. Some workers living in different states from their parents could also find that they need to pay higher rates for seeing doctors that are outside of the network.
Also see: When to kick adult children off your health plan
If you’re married, consider comparing the price of staying on a spouse’s plan with buying separate insurance. Many companies are adding surcharges for covering spouses, or dropping spousal coverage altogether.
For many freelancers, deciding if they should shop on the public exchanges may come down to whether or not they qualify for a federal subsidy. Individuals who earn below roughly $46,000 and families of four who earn less than $94,000 are likely to qualify for federal tax credits and should shop on their state exchange, says Louise Norris, owner of Insurance Shoppers, a health insurance brokerage based in Wellington, Colo. A list of the state exchanges can be found on Healthcare.gov.
Independent workers who aren’t eligible for subsidies shouldn’t rule out the public exchanges, but they may also want to shop for plans on private insurance exchanges where they could find options that may be more appealing, says Norris. And some workers may prefer to buy coverage through a group like the Freelancers Insurance Company, which offers group rates to workers in certain areas of New York. One caveat: Those buying coverage outside the new public exchanges should make sure the plan meets the minimum requirements to avoid paying the penalty, cautions Norris. (The penalty will be $95 next year or 1% of annual income, whichever is greater.) Plans that only offer vision or dental care or that only focus on specific conditions do not qualify, according to the Department of Health and Human Services.
Some young freelancers looking for basic coverage may find that so-called catastrophic plans, which come with high deductibles worth several thousands of dollars, are now a better deal. Starting next year, the plans will generally only be available to workers under age 30, but they will also be required to provide some preventive services and three primary care visits with no out-of-pocket costs, making them appealing to some relatively healthy 20-somethings. People buying these bare-bones plans can’t receive federal insurance subsidies, however.
Freelancers weighing those minimal plans or the less expensive options on the exchanges should be careful not to underinsure, says Williams. The high deductible plans could mean high out-of-pocket costs for those who end up needing more care than anticipated. “People who buy too little insurance can be the same as the uninsured,” he says.
Ultimately, many freelancers will be weighing the cost of coverage against the cost of the penalty for foregoing insurance, says Katie Vlietstra, director of government affairs for the National Association for the Self-Employed. “If people are still rolling the dice and maybe making a decision purely based on the numbers, they may not buy health insurance at all,” says Vlietstra.
Rachel Romano, an uninsured freelance writer and publicist in New York City, currently relies on community clinics for routine care and pays cash when she needs to see a specialist and buy prescriptions, but she worries about being unprepared for an emergency. She plans to shop for an insurance plan on the new exchanges, but she isn’t sure yet if it will be more feasible for her to sign up for a plan, which will likely cost a few hundred dollars each month in premiums, or pay the penalty, which could require her to make a onetime payment next year of several hundred dollars. She will likely make too much to qualify for a federal subsidy. “It’s nice to have options,” says Romano, 30. “But I don’t know if I’m going to ultimately take advantage of them.”