Guide to Health Insurance for Freelancers

Updated on April 2, 2020
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There are many pros associated with becoming a freelancer. You’re your own boss, you set your own schedule, and you decide which clients you’ll work with—just to name a few. However, a not-so-great part of freelancing is that you’re responsible for a lot of out-of-pocket expenses, including finding and paying for business insurance.

That’s not to say these expenses should be a dealbreaker. After all, the freelance market is continuing to grow. As of 2018, there were approximately 56.7 million freelancers in the United States, accounting for roughly 36% of the country’s workforce and contributing $1.3 trillion GDP. By some estimates, freelancers will make up the majority of the U.S. workforce by 2027. 

Of course, one big expense you’ve likely never thought too much about until becoming a freelancer is health insurance. Health insurance for freelancers is a must—just as it is for anyone else. But when an employer isn’t subsidizing the cost, it can be a real shock to your system—and your budget.

Below, we take a look at health insurance for freelancers, why they need it, and six potential sources of insurance that freelancers should consider. 

6 Health Insurance Options for Freelancers

Here are six options for how to obtain health insurance as a freelancer.

1. Join Your Parents’ Plan

If you’re a freelancer under the age of 26 and don’t mind turning to your parents for support, consider asking them if you can join (or stay on) the plan that they have through their employers.

The Affordable Care Act (also known as the ACA or Obamacare) makes this possible. Though in the past, most health insurance plans removed adult children from their parents’ policies at the age of 18 or 21, the ACA requires that health insurance companies offer dependent child coverage to adult children up to the age of 26. This means that even if your parents no longer claim you as a dependent, you can stay on their policy.

In fact, according to a report published by Upwork, this is precisely how 7% of full-time freelancers got their coverage in 2019. 

If you don’t want your parents to cover the costs of your health insurance but still want to benefit from the savings of a family plan, consider working out an agreement with them where you cover a portion of their monthly premium, as well as any expenses incurred on your behalf. 

2. Join a Spouse’s Plan

Joining your parent’s plan isn’t your only option for health insurance as a freelancer. If you’re married and your spouse has health insurance through their employer, you can potentially opt to join their policy so long as their employer offers family coverage. In couples where one spouse is a freelancer, it isn’t uncommon for the other spouse to work with a traditional employer in order to receive health insurance for the family. According to the Upwork report referenced above, this is how 15% of full-time freelancers receive health insurance coverage.

Doing so doesn’t come without cost, however. Joining your spouse’s plan causes it to convert from an individual to a family plan, which typically comes with higher monthly premiums, deductibles, and out-of-pocket maximums. While unavoidable, it’s still worth noting. 

Not married, but in a committed relationship with a partner who you share the same home with? you may still be able to qualify to join their plan as a “domestic partner.”

3. Apply for Coverage Through COBRA

If you currently carry health insurance sponsored by your employer and like your plan, but are leaving your job in order to pursue a freelance career, it may be possible for you to keep your existing coverage for anywhere from 18 to 36 months by electing COBRA coverage. 

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a government program that allows an employee (and, potentially, their families) to keep their employer-sponsored health insurance plan when they leave their job. COBRA works, essentially, by converting your group plan into an individual plan, which allows you to maintain all of the benefits and characteristics of the plan even after you part ways with your employer—at least, for a certain period of time.

While 18 months is typically cited as the maximum length of time that an individual can choose to elect coverage under COBRA, different qualifying events may provide longer maximum periods of coverage.

One important note, however, is that COBRA coverage tends to be expensive. While your employer likely helped you cover premium costs while you were employed, they are no longer required to do so if you elect to keep your plan under COBRA. This means you’re fully responsible for paying the total cost of your plan, in addition to a 2% administrative fee. In the end, this likely means that COBRA coverage will cost you much more than you were originally paying for your coverage.

If you really like your policy and are okay with paying that premium, this can be one way of doing so. That being said, it’s also possible to find a comparable plan for less money (or with governmental subsidies) by searching on the ACA marketplace.  

4. Turn to the Affordable Care Act Marketplace

One of the most consequential impacts that the ACA had on the health care industry revolves around its creation of a health insurance marketplace. Individuals are able to search the marketplace to find an insurance plan for themselves and their families. Plans are subsidized for many low earners. This is especially beneficial for workers who don’t have insurance through their employers—such as freelancers and other self-employed individuals. 

In addition to establishing a national health insurance marketplace, the ACA allowed states to build their own marketplaces if they chose to do so. If you are looking for coverage through the ACA, you should first turn to your state marketplace (if one exists). You can find a full list of those marketplaces here. If your state did not create its own marketplace, you should turn to the national marketplace

The open enrollment period (during which anyone can elect a health insurance plan through the ACA marketplace) typically runs from November 1 through December 15 of each year. Some state marketplaces open their enrollment periods sooner, and/or extend their deadlines beyond these dates. Additionally, you may be able to qualify for special enrollment if you go through a major life event such as marriage, divorce, or job loss, which impacts your insurance status.

5. Consider the Freelancers Union

The Freelancers Union is an organization in the United States that freelancers can join in order to receive benefits typically associated with labor unions. These benefits include advocacy on public policy which may impact freelancers, helpful resources that freelancers can leverage to improve their business, and yes—insurance.

Not only can you shop for health insurance through the Freelancers Union, but you can also turn to the union for other types of insurance, such as dental, disability, liability, accident, and term life insurance.

In order to apply for insurance through the Freelancers Union, you must be a member of the organization. The good news is, membership is free and doesn’t take long; the organization touts nearly 500,000 members as of 2020. 

Other professional organizations and trade groups may also offer insurance benefits to their members. If you belong to any such organization, it can be wise to see what is available to you—you may be surprised by the discounts that you can qualify for. 

6. Don’t Overlook Medicaid

If you are just starting your freelance business or otherwise have little-to-no income, you may qualify to receive health insurance through Medicaid, a government program designed to provide free or low-cost health insurance to low-income Americans. 

Because each state runs their own Medicaid program, each state is able to determine their own eligibility requirements. This means you will need to check with your individual state to determine whether or not you qualify. You can find a comprehensive overview of state Medicaid programs here

Generally speaking however, Healthcare.gov indicates that individuals who earn up to 138% of the federal poverty level (FPL) are likely entitled to Medicaid coverage, so long as their state has expanded Medicaid coverage as offered in the ACA. Though the federal policy level fluctuates each year according to inflation, in 2019 it was $12,760 for individuals. This means that freelancers making less than $17,608 per year may qualify for Medicaid coverage. 

Why Freelancers Need Health Insurance

Simply put, medical services in the United States are expensive. According to Healthcare.gov, medical expenses to fix a broken leg can cost up to $7,500, while a typical three-day hospital stay can come in close to $30,000. And the treatment for more advanced diagnoses, such as cancer, can fall in the range of hundreds of thousands of dollars—or more.

Without adequate health insurance coverage, you’ll have to pay all of these expenses out of pocket. This is why truly everyone should have health insurance.

For the majority of Americans who carry health insurance (56%), this coverage is made available through an employer-sponsored health insurance plan. This means that the employer has gone through the effort of selecting plan options and might even split (or completely cover) the monthly premiums for its employees.

But freelancers, by definition, don’t have employers. This means that freelancers need to find health insurance policies for themselves and their families, and pay for them on their own without the support of an employer.

What Health Insurance Covers

If you’re choosing your first health insurance plan, you may not know what’s covered in the first place. By law, all health insurance plans must cover 10 categories of essential health benefits, including:

  • Emergency services
  • Ambulatory patient services (outpatient)
  • Hospitalization (inpatient)
  • Pregnancy/maternity and childbirth care
  • Mental health and addiction services
  • Prescription drug coverage
  • Rehabilitative services
  • Laboratory services
  • Preventive care
  • Pediatric care (including dental and vision)

While all health insurance policies must provide dental and vision coverage for children up to the age of 18, plans for adults are not required to offer these services—though many often do, for an additional cost.

Average Cost of Health Insurance for Freelancers

When it comes to talking about the costs of health insurance, it’s important to first note that “costs” can be talked about in a few different ways. Some important terms that you should know include:

  • Premiums: Your health insurance premium is the monthly fee that you pay to your insurance company in order to be enrolled in the plan. It is, essentially, what you pay to purchase insurance.
  • Deductibles: A deductible is the amount of money you will need to pay out of pocket for your medical expenses before your insurance plan starts covering the costs. Once your deductible is met, you’ll only be responsible for paying your copay or coinsurance for related services. The deductible typically resets every year.
  • Copays: A copay (or copayment) is a fixed amount that you will be expected to pay for any service that is covered by your plan. Typically, copays kick in after you’ve met your annual deductible. Each individual covered service (or service category) will typically carry its own specific copay amount.
  • Coinsurance: Instead of copays, some plans make use of coinsurance, which is a percentage of the cost that you’re expected to pay for each service covered by your plan. Like copays, coinsurance typically kicks in after you’ve met your annual deductible.
  • Out-of-pocket costs: Out-of-pocket costs are the expenses which you must pay for on your own, which are not reimbursed by your provider. This is a broad grouping, including deductibles, copays, and coinsurance.
  • Out-of-pocket maximums: All health insurance plans carry an annual out-of-pocket maximum, which refers to the maximum amount that you will need to pay each year. Once this maximum is met, any additional covered medical expenses are taken care of by your plan.

Additionally, exactly how much your policy will cost you depends on a number of different factors. By law, factors that insurance companies are allowed to take into consideration when determining your premiums include:

  • Your age: Depending on your age, you can be charged more or less than others enrolled in the same plan as you. Older people can pay up to three times as much in premiums as younger people.
  • Location: Depending on where you live, you may pay more or less compared to those receiving similar coverage elsewhere. This is typically due to state and local laws, differences in competition, and differences in cost of living.
  • Tobacco use: Smokers can expect to pay up to 50% more than individuals who don’t smoke or use other tobacco products.
  • Plan category: Health insurance plans are split into different categories based on how you and your plan share your medical costs. Individuals in different plans can expect to pay different copays, monthly premiums, and out-of-pocket costs. The five main categories are Bronze, Silver, Gold, Platinum, and Catastrophic. While Platinum plans tend to carry the highest premiums and lowest out-of-pocket costs, Bronze plans tend to have the lowest monthly premiums and highest out-of-pocket costs, while Silver and Gold plans fall in the middle.
  • Individual vs. family enrollment: A health insurance plan covering an individual will naturally be less expensive than a comparable plan covering an individual and their spouse and/or children.

There are, though, certain factors that cannot impact your insurance costs: Your gender and your current health or medical history (such as pre-existing conditions).

As a result, the cost of health insurance for freelancers can vary substantially.

The Bottom Line

As a freelancer, purchasing health insurance is simply the right thing to do, helping you protect yourself and your family from potential financial ruin. 

While it’s easy to say that you simply “won’t get sick” (haven’t we all said that?) it’s important to remember that illness and injury are not always in our control. Accidents happen. Disease happens. It’s better for you to have health insurance in case you need it than to need it and not have it.

While you’re thinking about health insurance, it’s also important to bear in mind the other kinds of business insurance for freelancers that you may need. After all, you don’t want to be stuck relying on your credit card for major emergencies—that’s an all-too-common financial mistake you can easily avoid.

Tim Stobierski

Tim Stobierski is a Senior Content Marketing Specialist at Pepperland Marketing, where he spends his days writing, editing, and strategizing content for clients in a range of industries. He is also a freelance writer and editor focused on the finance sector, and the founder of StudentDebtWarriors.com, a free resource for college students, graduates, and parents who are struggling to make sense of the complicated world of student loans. In addition to his work as a content specialist, Tim is a published poet and essayist. His first book of poetry, Chronicles of a Bee Whisperer, was published in 2012 by River Otter Press. Tim graduated from the University of Connecticut in 2011 with his bachelor's degree in English literature and a concentration in creative writing.
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