How To Choose Health Insurance: Guide For Freelancers & Agencies

Lining up health insurance was the single scariest part of leaving my day job. Choosing your own health plan is surprisingly tough, even if you’re financially savvy. But you can do it well, and I’d like to show you how.

This subject is incredibly personal for me. Since running my agency full-time in 2021, my household has needed a lot of medical care. A few months after going full-time, I ended up needing spine surgery out of the blue.

Then, my wife and I had our first child at the end of 2023. And there is a whole lot that’s happened since 2021 that I’m leaving out too.

But I’ll tell you this: our health insurance has covered everything we’ve needed it to, even in the stressful years when we hit our out-of-pocket maximums. Our doctors and prescription drugs have been covered, as have our emergencies.

We’ve had to dip into our emergency fund, but we’ve never had to drain it outright or lean on credit cards. We’ve even managed to stay on track with many of our financial goals.

The literal only reason this is possible is good health insurance. My family’s gone through some shocks that could have destroyed our business otherwise.

Now with all that said, I want to share with you what I’ve learned so you can choose the right health insurance too.

Quick Note: As with my other posts, my assumption in writing this is that you’re in the US, running a freelance or small agency operation. You’re probably a sole proprietor or single-member LLC. Please note that this is a very US-specific post, and that much of this will not apply if you’re outside of the country.

11 Steps To Choose Health Insurance As a Freelancer or Small Agency Owner

Choosing the right health insurance for freelancers and small agency owners is time-consuming and complex. But thankfully, many parts of the process have improved in recent years (even if the premiums have not)!

With that in mind, here are 11 clear steps you can follow to make the right choice for your health needs.

1. Know your rights.

In the United States, you have specific rights under health laws that protect you and ensure fair treatment. For example, the Affordable Care Act (ACA) prohibits the denial of coverage due to pre-existing conditions. This means your health history cannot prevent you from obtaining insurance.

Additionally, the No Surprises Act guards against unexpected bills from out-of-network providers in emergency situations or when you’re not informed of network status beforehand. This went into effect on January 1, 2022 and can be really helpful.

My wife was transferred to an out-of-network hospital when the ER we took her to was out of beds. The emergency treatment and the inpatient stay to follow were covered by our insurance, even though they would not have normally been.

You should also know that you can often negotiate with hospitals as well. Healthcare providers often offer lower rates for direct or early payments, and I’ve seen discounts as high as 25%. If you have the cash available, it’s worth asking.

Lastly, you should always review every charge on your medical bills. Errors happen. Reading the actual line items you are being charged for can help you save a lot of money. Request itemized bills and question any charges that seem incorrect or unclear.

Easy Step 1: Read about the ACA and No Surprises Act.

2. Figure out how much coverage you need.

Your health insurance premiums will be one of the largest expenses you pay on a regular basis. You need to budget accordingly.

If you don’t anticipate needing a lot of healthcare, you might choose a less expensive plan. Typically, such a plan might have lower premiums, but a higher deductible and out-of-pocket maximum. (I’ll explain these terms more later.) That means you would pay much less per month, but if you’re in a car wreck or something like that, your ER visit and hospital stay could be much more expensive.

Personally, I like getting as much coverage as I can. I know I’m probably paying more on premiums than I need to, but I like the comfort of having a low deductible, low out-of-pocket maximum, and extensive coverage.

This is a very personal choice, so consider your medical history. If you have chronic conditions or frequent healthcare needs, more comprehensive coverage might be necessary. Also, think about your family size—more dependents typically require greater coverage.

I will get into further details in the following sections. For now, just be aware there is a trade off. More extensive coverage provides greater security but at a higher ongoing cost. Less extensive coverage lowers your monthly outlay but involves more risk.

Easy Step 1: Figure out how much healthcare you are likely to need.

3. Select a health insurance marketplace.

Health insurance can be selected through various marketplaces online.  For freelancers and small agency owners, I would recommend starting with the federal Health Insurance Marketplace at healthcare.gov or a state-specific exchange if available. If you prefer a private option, I have also used SimplyInsured and liked their service.

No matter where you look, you’ll be able to compare plans side-by-side. That way you can compare factors like premiums, deductibles, out-of-pocket maximums, and provider networks. (More on that in the following section.)

Easy Step 1: Choose between federal or state marketplaces based on your location.

4. Research premiums, deductibles, and out-of-pocket maximum costs.

When it comes to picking health insurance, there is no way around understanding the jargon. Read this section and the following ones closely.

Here are some terms you need to know.

  • Premiums: The monthly cost you pay for coverage. Lower premiums often mean higher deductibles and vice versa.
  • Deductibles: The amount you must pay out of pocket before your insurance begins to cover costs. A higher deductible can significantly reduce your monthly premium but means more initial expenses during medical visits.
  • Out-of-Pocket Maximums: The maximum amount you will spend in a year for covered services. Once you hit this limit, the insurance covers 100% of services.
  • Coinsurance: This is the amount your health insurance plan pays for healthcare after you hit your deductible, but before you hit your out-of-pocket maximum.

Remember – there is usually a trade-off between these two broad categories:

  1. Low premiums with high deductibles and out-of-pocket maximums. Coinsurance tends to be less favorable. (Better if you use less healthcare in a plan year.)
  2. High premiums with low deductibles and out-of-pocket maximums. Coinsurance tends to be more favorable. (Better if you use more healthcare in a plan year.)

Easy Step 1: Research these four terms until you understand them completely – they are very important to evaluating plan cost.

5. Research available plan types.

There are different types of health insurance plans as well. You are likely to see the following four terms come up as you are shopping.

  • Health Maintenance Organization (HMO): Offers lower costs but restricts you to network providers. Referrals are needed to see specialists.
  • Preferred Provider Organization (PPO): Higher costs, but allows more flexibility in choosing providers. No referrals needed.
  • Exclusive Provider Organization (EPO): Only covers in-network care without requiring referrals. Generally lower costs than PPO.
  • Point of Service (POS): Combines elements of HMO and PPO. You need referrals for specialists but have more flexibility than traditional HMO.

Each type has its advantages and limitations depending on your healthcare needs and preferences for provider flexibility. Evaluate what is most important to you—cost savings or flexibility—and choose accordingly. Note that your options may be limited by the healthcare plans available on the federal or state exchange for your region.

Easy Step 1: Research available plan types and choose the one you like best.

6. Research network coverage.

Different health insurance plans are tied to different networks. Different networks work with different doctors and healthcare facilities.

This is really important to understand, because you don’t want to have a doctor you really like, but a plan that won’t cover them. Make sure all your preferred doctors and hospitals are covered by healthcare plans you are considering. Marketplaces typically make this easy, but you may have to contact health insurance providers directly and ask them about specific plans and the services they cover.

Please don’t skip this step! The last thing you want is a massive bill from an out-of-network provider.

But please also note – if you are in an emergency situation, you can go to an out-of-network ER while paying in-network rates. This is what the No Surprises Act, passed in 2022, has thankfully made possible.

7. Consider subsidies and tax breaks.

If you use a government healthcare marketplace, you can significantly lower your monthly premiums based on your income level. Unless you make tons of money, you will probably get at least a small government subsidy on your health insurance. Take advantage of it and work with a certified public accountant to make sure you get the tax breaks you deserve!

Additionally, consider setting up a Health Savings Account (HSA). Not every plan will let you use one. But if your plan is compatible with an HSA, then you can take advantage of the fact that HSAs let you save money tax-free for medical expenses, further reducing your taxable income.

If you’re self-employed, you may also qualify for the self-employed health insurance deduction, which lets you deduct premiums paid for medical, dental, and long-term care insurance. This deduction is available whether you itemize deductions or not and can cover your dependents and spouse. Understanding these options can lead to considerable savings, reducing the overall cost of your health insurance.

Easy Step 1: See if you can get a subsidy on your health insurance.

8. Narrow down your options.

Now that you understand the key factors that go into health insurance, the next step is narrowing them down. I recommend that you consider the following factors:

  • Monthly Cost: That is, how much you pay in premiums.
  • Worst-Case Scenarios: How much you will pay if something really bad happens, according to deductible, out-of-pocket maximum, and coinsurance.
  • Network Coverage: Whether or not your preferred providers are covered.
  • Company Reputation: Ask around and see if people in your area prefer Blue Cross, United Healthcare, Aetna, or other major companies. I’ve personally had the best luck with Blue Cross, but this is very regional and personal!

Using a healthcare marketplace is overwhelming. You will have a lot of options. However, most won’t be a fit for you, so you should try to eliminate them so you can really scrutinize the ones that might be.

Easy Step 1: Pick 3-5 plans you like.

9. Submit an application during open enrollment or a qualifying life event.

You can’t just get insurance any time you like. Generally, you can only apply for health insurance during open enrollment, which is close to the end of the year. In some situations, called qualifying life events (QLEs), you can apply at different times of the year.

If you need to apply outside of open enrollment, common QLEs include: getting married or divorced, having or adopting a child, a death in the family, or loss of existing coverage (such as by leaving a job).

Easy Step 1: Figure out when your next chance to apply for insurance is. Ask yourself: “have I experienced or will I soon experience a QLE?”

10. Track your health insurance expenses correctly.

Accurately tracking your health insurance expenses is, as you can imagine, very important for taxes. Generally, premiums paid for your own health insurance are deductible on your Form 1040 but not on Schedule C, unless they are specifically for your employees, in which case they are deductible. (But always talk to an accountant to be sure!)

Maintaining clear records of all health insurance payments can help maximize your tax deductions and minimize issues during tax filing.

Don’t skip this step – it has personally tripped me up in the past and is public enemy #1 when it comes to surprise tax bills on my annual returns.

Easy Step 1: Document expenses clearly to optimize tax deductions and compliance.

11. Review your health insurance every year during open enrollment.

Once you pick a health insurance plan you like, you can rest a little easier. But don’t just assume that it is always going to be the best one. Every time open enrollment comes around, at least look at other plans and consider switching.

I personally have stuck with the same health insurance plan for three years because I like it. But I would switch in a heartbeat if a very similar plan popped up on the marketplace for $100 less per month.

Easy Step 1: Annually reassess your plan to ensure it meets your needs.

Final Thoughts

I know it’s scary to choose health insurance for yourself and your family. This is one of the ugliest parts of going from a day job to freelancing or running a small agency.

You have to carefully scrutinize your options and think about what you need. It’s all very personal and there is no single plan that will work for everyone.

Even having said that, I sincerely hope that this guide helps you pick a health insurance plan that works for you and the people who matter most to you. Following these steps has gotten me out of more bad situations than I care to count!

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