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Importance of Medical Insurance for the Self-Employed

Nearly 30% of Americans are self-employed, a number that has increasingly grown over the years.1 Workers that once held on to the traditional job for employer-sponsored insurance are even starting to make the switch as some companies have cut back on benefits due to rising healthcare costs.2

With less incentive to stick to a 9-5, the flexibility and freedom that comes with working for yourself has lured many over to the independent contractor sector. Technology has also made it easier than ever before to run your own freelance business from the comfort of your home.

Working for yourself comes with many benefits, but it also comes with a lot of added responsibility. You don’t get PTO or sick days, and you probably don’t have a guaranteed salary. Self-employed and independent contractors work hard for their money, and any amount of time they are unable to work is income lost.

The importance of self-employed health insurance

Health insurance is vital for all self-employed workers for SO. MANY. REASONS. We would love to tell you about all of them, but that would take a really, really, really long time.

Did you know that uninsured adults are more likely to die prematurely than adults who have insurance?3 Not only does health insurance help you save money on medical services, but it gets you into a regular schedule of health screenings and doctors’ visits to prevent illnesses and catch them early if they do arise. But more than that, health insurance offers resources to help you navigate the complex medical system so you can get help when you need it.

 

Health screenings

Compared to those who have health coverage, people without health insurance are more likely to skip preventive services and report that they do not have a regular source of health care. Uninsured adults are over three times more likely than insured adults to say they have not had a visit about their own health to a doctor or other health professional’s office or clinic in the past 12 months.4

This also means they are less likely to receive recommended health screenings such as blood pressure checks, cholesterol checks, blood sugar screening, pap smear or mammogram (among women), and colon cancer screening. Diabetes, heart disease, stroke, cancer, and osteoporosis and just a few examples of conditions that can be prevented and/or managed when detected early on with routine health screenings.5

What if I can’t afford health insurance?

There is a big misconception in the United States about health insurance being a luxury, when in fact, it is a necessity. Prioritizing your health means that you are also prioritizing your ability to make a living, to spend time with your family, and to live a long and healthy life.

Remember, you have OPTIONS when you get health insurance through Woligo. You are not just limited to private carriers. Our team of professionals stands ready to show you all of your options across private carriers and the Marketplace (more on the Marketplace below!)

Medical debt and bankruptcy

A recent study from academic researchers found that 66.5 percent of all bankruptcies were tied to medical issues —either because of high costs for care or time out of work. The research found that an estimated 530,000 families turn to bankruptcy each year because of medical issues and bills.6

  

Many people think that filing for bankruptcy is an easy way to wipe your slate clean of debt, but it is a very costly process, and not only financially. When you file for bankruptcy, it stays on your credit report for ten years and severely damages your credit score. That will hinder your ability to buy a house, find a job, take out a loan, and do a variety of other things.

Ironically, filing for bankruptcy also requires you to get an attorney because the bankruptcy code in the United States is extremely complicated. Adding expensive attorney and filing fees on top of your previous debt will only make it worse.7

It’s important to note that a variety of things can cause medical debt. Maybe you don’t have medical insurance, or you have the wrong medical insurance for your needs. Having inadequate coverage can be just as bad as having no health insurance at all. When you are ready to buy health insurance for independent contractors, you must find a qualified team of professionals to help you weigh your options and find the coverage you need.

How does health insurance work?

Now that you understand why health insurance is so important for independent contractors and self-employed workers, Woligo is here to break down how health insurance works. We care about educating our customers, so you understand the process and know how to maximize your benefits to stay healthy!

self employed female researching how medical insurance works on her computer

Health insurance works to help pay for medical expenses and protects you from paying the total cost of medical services. Health insurance for independent contractors works if you become ill or simply go to the doctor for routine health screenings.

What is an annual premium?

The term “annual premium” refers to the amount of money you agree to pay an insurance company each year in exchange for your insurance policy. Annual premiums are typically split into monthly payments, so you don’t have to pay the entire amount at once.

What is a copay?

The term “copayment” or “copay” is a fixed, upfront amount you pay each time you receive medical care that is subject to a copay. For example, you might have a $35 copay each time you go to see your chiropractor. Typically, you will not have to pay a copay for preventive health screening services like going to see your primary care doctor for your annual physical.

What is an annual deductible?

The term “annual deductible” is the amount of money you pay each plan year before your insurance company starts paying its share of the costs. For example, if your annual deductible is $2,500, then you would be responsible for paying the first $2,500 of your medical expenses each year, and then the insurance company would start paying its agreed upon share.

What is coinsurance?

The term “coinsurance” refers to the percentage of the cost of your medical care for which you are responsible. For an MRI that costs $1,000 you might pay 15% ($150), and your insurance company will pay the remaining 85% ($850). Plans with higher premiums typically have less coinsurance.

What are out-of-pocket expenses?

The term “out-of-pocket expenses” refers to the portion of your medical expenses that the insurance company does not cover, and you must pay on your own.

If I am a self-employed worker, can I get health insurance for my family?

Yes! The term “individual health plan” is only to differentiate it from an employer-sponsored health plan. It doesn’t mean the health plan is only for one individual. When you get individual health insurance for self-employed workers, you can add a dependent child under the age of 26 and your spouse.

However, you can only make changes to your health insurance plan at certain times throughout the year. Most states have open enrollment periods from November 1 through January 15, although some have longer enrollment periods. You can change your current health insurance plan, add qualifying dependents, or obtain new coverage during this time.

You can also make changes to your health insurance plan during a qualifying life event (QLE), such as a marriage, divorce, death, change of address, or birth.

Asian mother laying in bed with infant

How much is health insurance for self-employed workers?

Many factors determine how much health insurance will cost, such as your income, your location/state, the number of people in your family, the amount of coverage you want, and your deductible limits. Under the ACA, insurance companies cannot charge you more if you have pre-existing medical conditions.

Can I deduct the amount I paid for self-employed health insurance?

Possibly! You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents. The health insurance can cover your child under age 27 at the end of 2020, even if the child wasn’t your dependent. A child includes your son, daughter, stepchild, adopted child, or foster child.

To qualify for a deduction, one of the following statements must be true.

  • You were self-employed and had a net profit for the year reported on Schedule C (Form 1040) or Schedule F (Form 1040).
  • You were a partner with net earnings from self-employment for the year reported on Schedule K-1 (Form 1065), box 14, code A.
  • You used one of the optional methods to figure your net earnings from self-employment on Schedule SE.
  • You received wages in 2020 from an S corporation in which you were a more-than-2% shareholder. Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2.

There are other metrics you must meet before you can qualify for the self-employed health insurance deduction. For more information, make sure you check out the IRS’s guidance on deducting business expenses and consider speaking with a certified tax professional.

What is the best medical insurance for self-employed workers?

The best medical insurance plan is the one that offers the right coverage for you. Our brokers scour the ends of the earth, AKA search through all the national and regional carriers in the individual market, both on and off the Marketplace (CA excluded) to make sure they find the very best medical insurance for you.

What is the Marketplace?

In 2008, President Barack Obama signed the Patient Protection and Affordable Care Act (ACA), known as Obamacare. This Act created a government-run price comparison website for subsidized health insurance under the ACA.

Health insurance for independent contractors

Health insurance makes a difference in whether and when people get necessary medical care, where they get their care, and ultimately, how healthy they are. Uninsured people are far more likely than those with insurance to postpone health care or forgo it altogether. The consequences can be severe, mainly when preventable conditions or chronic diseases go undetected.

Whether you are a freelancer looking for your own insurance or a small business owner seeking a health plan for your employees, we are ready to find the best option for you.  Click here to find the solution that best meets your needs.

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Sources:

  1. Survey: Nearly 30% Of Americans Are Self-Employed (forbes.com)
  2. Trending: Fewer Spouses Covered on Employee Benefit Plans - Word on Benefits (ifebp.org)
  3. Health Insurance and Mortality in US Adults (nih.gov)
  4. The Uninsured and the ACA: A Primer – Key Facts about Health Insurance and the Uninsured amidst Changes to the Affordable Care Act – How does lack of insurance affect access to care? – 7451-14 | KFF
  5. Top Five Preventable Diseases: How to save yourself now! | Lifestyles | thesouthern.com
  6. This is the real reason most Americans file for bankruptcy (cnbc.com)
  7. Medical Bills: The Leading Cause of Bankruptcy in the United States - Apex EDI | Apex EDI