Insurance Options for Freelancers

Health Insurance for the Independent Contractor

As a working freelancer or entrepreneur, you may find yourself in many of these positions throughout your lifetime:

You leave a company (or the company changes insurance plans) and lose your coverage

You have coverage (through your company or spouse) but the deductible is so high that it covers almost nothing

You pay hundreds of dollars a month for coverage through your own company, or through COBRA

Your benefits are denied because you did not pre-certify

Your benefits are denied because you went to the wrong doctor or hospital

You have individual coverage because you work for yourself

You have individual coverage and a pre-existing condition that will not be covered

Your health insurance will not pay for your prescriptions

You are denied health insurance

You have no health insurance at all

I have had been in these positions every single one of them throughout my life so far. And I am a healthy 28 year old woman. I shudder to think how much the rest of you have struggled.

Finding good health insurance is one of those tasks that we all universally hate. (Managing your health insurance plan is pretty terrible, too.) Individual coverage and group plans, HMOS and PPOs, deductibles and HSAs, it’s all one giant mess. How did our health care system wind up so complicated, and how in the world can we navigate through all of our options to find a solution?

In an era long-since abandoned, there was such a thing as a lifetime career’ with just one company. This company provided you with excellent health care coverage, entirely at their cost (which was the least they could do for you). If you were ill or injured, you simply went to the doctor and it all was taken care of. There was no deductible – not even a co-pay.

Sounds like euphoria, doesn’t it?

Unfortunately, times have changed. And while I am hopeful that our new administration will bring some much-needed change to the health care industry as a whole, I am not nave enough to believe that it will happen anytime soon.

So what are your options as an independent?

Day job If you work full-time or part-time for an established company, that job may offer group health insurance to you (either at no upfront cost to you or for a portion of the monthly premiums). If what they offer is even a halfway decent plan that you are eligible for, take it. Even if you only plan to be there for a short time, accepting their coverage will give you the option of COBRA coverage later on.

Some jobs may also offer HSAs, or cafeteria’ health insurance savings plans. Essentially you pay for your own health care through these programs, so you have total control over what you spend and where. You get to pay for these items with pre-tax dollars. Usually this is offered as supplemental coverage, not as a health care solution, but I’ve seen it all. They are better than nothing, I suppose, but they aren’t really a solution. That said, if you have to get individual coverage and have access to this type of plan, take advantage of it.

Spouse If you are married, you may be able to obtain coverage through your spouse’s employer. This may be an expensive option, and be advised that smaller companies tend to offer insurance only to employees (no spouse or family coverage). Even if this is the policy, you may be able to talk to the owner and offer to pay the full cost of your premium. It can’t hurt to ask. Similarly, if you are in a common-law or same-sex marriage, ask if you are eligible. The worst answer you can get is no, and that is the default answer if you never ask.

COBRA If you are covered under a group plan, and you or your spouse lose coverage because of termination, you qualify for COBRA coverage for 18 months. Essentially, under this plan you are entitled to receive the same insurance as you did when you were an employee (or their spouse), but you must pay the entire premium out of pocket.

This coverage applies whether you quit your job or are fired. And here is a biggie you can accept COBRA coverage under your spouse’s plan EVEN IF THEY DON”T ACCEPT THE COVERAGE.

Coverage through your own company In some states, you can obtain group coverage for a company that has a group of one’. This can be a great alternative solution for any independent contractor, especially for freelance artists who receive so many 1099s each year. Check into this strategy and compare plans – at I believe that in Illinois even sole proprietorships (read you) or partnerships can qualify. Of course, you are paying the full cost of your coverage, which can be expensive. On the other hand, you now have the ability to control your health care plan, and the cost to you is tax-deductible.

Individual coverage Insurance companies have been selling individual insurance plans for years. Short-term or “gap” coverage falls under the heading of Individual Coverage as well. The trouble with these plans is that no matter which plan you choose, you are subject to a pre-existing condition clause. The insurance company derives their pre-existing conditions from the health survey that you must fill out, as well as statements from your past physicians. My experience with these clauses is best summed up by a conversation I had with my last individual coverage policyholder:

Insurance Customer Service: “Your medical history shows that you have a slight issue with cholesterol.”

Me: “Yes I am on medication to control it”.

Insurance Customer Service: “All right. Just so you are aware, because of your health issue, all diagnosis and treatment associated with your metabolism will be regarded as a pre-existing condition until at least 2012. We will not cover any medication associated with your metabolism. Or any tests. And if you speak to the doctor about your weight or metabolism at all, that visit will not be covered.”

Me: “But I don’t have a health issue as long as I am allowed to take my medication.”

Insurance Customer Service: “Well, you do so at your own risk. If you’re still alive in 5 years, we may decide to cover you then.”

Am I exaggerating? I’m really not. This is pretty much the conversation verbatim.

No coverage This really should not be listed as an option. That said, many individuals go without health insurance because it is too expensive. If you want to run the gamble, so be it, I can’t stop you. But be advised that even one unexpected injury or illness could cost you thousands of dollars. Thousands upon thousands. A friend of mine was in a motorcycle crash (not his fault) and went to the hospital uninsured. He owes the various medical treatment centers over $100,000 and the man didn’t even have surgery. Just food for thought.

About payment plans: There are 3 things you can count on when dealing with a hospital or doctor:

1) There will be paperwork to fill out

2) It will cost more than you realized it would

3) They will usually agree to a payment plan if you ask them.

Payment plans are the one silver lining in this hurricane. I have paid off thousands of dollars of medical debt by sending in one $25 check at a time. Most medical billing companies will continue to send you statements, but as long as you talk to them (and keep sending in money, no matter how small the amount) they will have compassion to your situation.

There is an occasional odd service provider who insists on payment in full. There was a vet that I frequented in Pasadena that did not take payment plans, refused pet insurance and posted a sign in their lobby which said so. Nevertheless, when my cat was sick I told her that I could not pay all at once, and she reduced my bill by almost half. Now, don’t get me wrong, pet health insurance is significantly different from health insurance for humans, but the principle still holds.

Always, always ask. And don’t pay via credit card unless you absolutely cannot help it.

I hope that this article helps you manage your health care situation, and lets you get back to focusing on your business, whatever that may be.