Figuring out independent contractor health insurance is one of the very first steps you should take when becoming an entrepreneur. As a self-employed individual, you don’t get access to employer-sponsored health coverage, so you’ll need to look for a plan through the healthcare marketplace.
The Affordable Care Act (ACA) makes it easy for freelancers and solopreneurs to get the coverage they need without relying on a group plan from an employer. But is it affordable? By exploring health insurance coverage options from the ACA and researching opportunities for extra savings, you can protect yourself with an affordable health insurance plan that fits in with your lifestyle as a gig worker, contractor, or small business owner.
Understanding the Affordable Care Act for Self-Employed Workers
The ACA expanded access to 1099 medical insurance, ensuring that people without employer-sponsored coverage could get insured, even if they had a pre-existing condition. It also created tax credit programs to help lower-income individuals pay less for their premiums.
If you want to start your own business, support yourself through freelance projects, or do any kind of contract work, getting a marketplace plan is typically your best bet for finding a reliable, budget-friendly plan. This is especially important as more people take on gig work, such as driving for a rideshare app or delivering food. There aren’t company-provided options for Uber health insurance, DoorDash health insurance, or Lyft health insurance, so if you drive for one of these third-party platforms, you’ll still need to provide your own policy.
Exploring Coverage Options Under the ACA
If you’re self-employed, you can search the state healthcare marketplace, Covered California, to browse all available options for standard policies. There will be multiple types of health insurance plans, such as HMOs and EPOs. You’ll get a chance to view the benefits and stipulations of each plan, including deductibles, out-of-pocket limits, and monthly premiums. However, you may be able to leverage an ACA savings plan to decrease your monthly costs even more.
Qualifying for Marketplace Savings as a Self-Employed Individual
The Affordable Care Act bill includes something called the Premium Tax Credit to make marketplace coverage more budget-friendly. This refundable tax credit subsidizes monthly premiums for self-employed individuals who earn less than a certain amount. The Premium Tax Credit works on a sliding scale, so the less you earn, the more you can save on your coverage. When signing up for your coverage, a bilingual Freeway agent can walk you through the process for free to find out if you qualify for free or low-cost health insurance.
Instead of waiting until tax season to receive the credit, you can get an advance that goes toward your monthly premiums. For example, if you have a $1,500 premium tax credit, you could decrease your total yearly premiums by up to $1,500. That means you could get up to a $125 discount each month. Or, you could opt not to use the full amount and then receive the remaining sum in bulk when you file your taxes.
It’s important to note that your tax credit is based on your estimated income. If you end up earning more than you expected and use the full credit, you may have to pay back some of the money during tax season. As a self-employed person, you know that your income can vary based on the availability of gigs in your area, so it’s important to look at your past earnings to come up with an accurate estimate.
Alternative Health Coverage Solutions in CA
The ACA for independent contractors isn’t always your only option. As a gig worker, you may also want to see if you qualify for Medi-Cal, California’s Medicaid Program, which will set you up for free or low-cost medical services. If you earn 138% of the federal poverty level or less, you’ll likely qualify. When you apply for health insurance through the California marketplace, your application will automatically be routed to Medi-Cal if you qualify.
Strategies for Navigating Health Insurance as a Self-Employed Person
If you’re a gig worker, there are tons of tips you can use to be proactive about your health insurance. Here are a couple of techniques that can make the process easier:
- Review your health costs: Look at how much you spent on healthcare in previous years, how often you went to the doctor, and other factors that could help you estimate your future costs. This can help you determine the right level of coverage for you.
- Keep track of your earnings: If you’re using the premium tax credit, carefully track your income. That way, if you earn too much to qualify, you can plan ahead and save up to pay back any overages.
- Check your spouse’s coverage: If you’re married and your spouse is employed, you may be able to get coverage through their job instead of signing up for your own policy.
Potential Challenges and Workarounds
Managing your own health insurance for gig workers can be difficult, but it’s easier when you know what to expect. Understanding common hurdles can help you set yourself up for success and keep costs low.
Dealing with High-Cost Plans
Many plans on the marketplace can be expensive. First, check and see if you qualify for the Premium Tax Credit. If you don’t, you may still be able to find a plan that works with your budget. Sort the options by monthly cost, then see if one of the cheaper plans fits in with your healthcare needs. High-deductible plans often allow you to set up a tax-deferred Health Savings Account you can use to fund healthcare expenses.
Assembly Bill 5 and Its Impact on Health Coverage
In California, Assembly Bill 5 transformed how workers are classified, which means that some independent contractors actually qualify as employees. Under the law, employers need to prove that independent contractors aren’t employees by confirming they meet these standards:
- The company doesn’t control how the contractor performs their services.
- The contractor is doing work that doesn’t fit in with the company’s standard operations.
- The worker typically performs independent contracting work.
Staying Informed and Compliant with ACA Regulations
Healthcare legislation can change over time, so it’s important to regularly review local laws and make sure you’re up to date with any expectations. If you ever expand your independent contracting business and hire other employees, you’ll also have to review your obligations as an employer when it comes to offering group insurance.
Make Sure You’re Covered
As an entrepreneur, nothing can disrupt your business like unexpected health problems. By signing up for an affordable plan through Covered California, you can get the benefits you deserve without relying on an employer’s health plan. Signing up for tax subsidies and choosing the right plan can get you the protection you need while you work as an independent contractor.
Having the right guidance can make a huge difference when exploring health plans as an independent contractor. At Freeway, we can help you pick out the perfect policy for both your medical needs and your budget for free. Set yourself up for success by talking to an agent at a local Freeway Insurance office, getting an online quote, or calling the team at 877-930-1317.
