Self Employed Health Insurance Explained is the first article in a series titled, Overcoming Objections. Battling through the list of objections to why you could never work from home or be your own boss is the first step to self employment. This series will break down each objection and provide concrete tools to overcome your self employment challenges and break free of the 9 to 5 grind.

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But I Can’t Lose My Company Insurance

When I speak to aspiring entrepreneurs or side hustlers, this is one of the most common reasons that people do not follow through with self employment. But, these are different times. And although the subject of health insurance in the United States is in constant flux, self employed health insurance does not need to be the reason you stay stuck in your job.

Your Health Insurance Challenges

A lot has changed in the past seven years when it comes to health insurance options for freelancers and self employed individuals. Prior to the Affordable Care Act, applying for health insurance as a freelancer or small business owner posed several challenges:

• Preexisting conditions often meant immediate denial of health care coverage.
• Even if you were healthy, choices were not affordable
• Insurance companies were permitted to cap benefits and kick self employed people off their insurance for minor technicalities.

Although health insurance can still be an expense for those struggling to get their business started, self employed health insurance is much more accessible. Additional protections, such as subsidies and guaranteed approvals have leveled the playing field for entrepreneurs who are taking the leap to full time self employment.

Here Are the Self Employed Health Insurance Basics

• The Affordable Care Act requires that states either offer their own health insurance marketplaces, also called exchanges, or their residents can purchase health insurance through the government’s marketplace.
• Subsidies were created by the ACA to reduce the cost of insurance for Americans who earn below a certain income threshold. Current income is considered, not your assets or what is in your bank account. If you decide to quit your job tomorrow to turn your side hustle into your full time self employment, you are eligible to apply for health insurance based on your current income. According to final enrollment data for 2016, those who qualified for the subsidy realized a 73% reduction in their health insurance costs.
• The plans offered through the Affordable Care Act are rated platinum, gold, silver, or bronze. The ratings are a quick way to filter out health insurance plans that do not fit your needs. If you are fairly healthy and prefer to opt for a plan that has a higher deductible and lower monthly premium, select a silver or bronze plan. If you want a high quality plan with lower deductibles, review the gold or platinum plans.
• If you are not comfortable with what is offered on the marketplace, there are other options.
• As a freelancer or self employed individual, you can deduct the cost of your health insurance as an “above the line deduction,” which will lower your taxable income, helping you out at tax time.

Let’s Run the Numbers

If you have worked a full-time job, you probably didn’t pay much attention to how much your health insurance costs. Let’s do the math.

• The average cost for employer provided health care for an individual is $6,435 per year. Of that, the average employee contribution was $1,158, or $97/month.
• The average cost for private insurance for an individual is $2,820 per year, or $235/month.

If your new startup business earns $1,656 more per year than your previous income from your job, you have paid for your insurance. And that is the self employment goal, right? To earn more in fewer hours!

These calculations are based on averages and your situation may be different, better or worse. The point is that, despite the rumors that leaving your job will mean that you will not be able to have health insurance, affordable health insurance is possible for freelancers and the self employed.

When self employed health insurance shoppers see how much health insurance costs, some consider going back to their job, but don’t be hasty. Consider that the Affordable Care Act capped the amount that Americans will be required to pay for in-network health care at $6,850/year for an individual plan. If you are just starting your business and are not yet showing much income, your health insurance could be free after the subsidies are applied.

If you earn less than $47,520 as an individual or less than $97,200 for a family of four, you should qualify for a subsidy. Use the KFF calculator to check your subsidy.

The Short and Sweet

If you live in Florida, Texas, Ohio, Alabama, or Nebraska, request a free quote from Craig. If you live outside of Craig’s service area, connect with him for a referral to another self employment health insurance specialist in your area. Either way, request more info from Craig to make sure that you have quality, affordable health insurance.

If you are still doing the 9 to 5 grind, pay attention to your employer provided health insurance and figure out how much more you need to earn from self employment to compensate for the increase in cost. Do not allow health insurance to hold you back from realizing the freedom that comes from self employment. Stay tuned for Part 2 of Overcoming Objectives.