The freedom and flexibility of freelancing instead of seeking traditional employment unfortunately has some downsides, particularly when it comes to selecting health insurance and covering medical expenses (you don’t get sick days as a freelancer, after all). Considering the fact that nearly 50% of the US workforce could be comprised of independent contractors by 2020, it’s important for anyone considering a career in the “gig economy” to understand their health insurance options before the next open enrollment period.
If you’re currently uninsured or a new freelancer who wants to get the best medical coverage possible, here are 3 steps for successfully navigating the world of health insurance as an independent contractor:
Find the Best Plan for Your Needs
When you’re on your own for health insurance, you have a bit more freedom when it comes to selecting the right health plan for you (and your family). If you’re young, healthy and don’t smoke, then a high deductible plan with low monthly payments could be ideal for your situation. On the other hand, if you visit doctors multiple times per year and/or have multiple prescriptions, then you may benefit more from paying higher monthly premiums in exchange for lower annual deductibles.
There is no “perfect health plan” out there – it all depends on what you’re willing and able to pay each month for premiums, how often you predict you’ll use your plan, and how much you could afford to shell out-of-pocket each year for medical bills before your deductible limit kicks in.
Get Supplemental Health Insurance
If you choose a high deductible health insurance plan, then you might not have enough coverage in case of emergencies. Any freelancer who would like to have more peace of mind when it comes to their well-being should certainly look into supplemental health plans, such as a health savings account (HSA) or critical illness/injury plan.
With an HSA, you can set aside pre-tax income into a savings account that you won’t have to pay taxes on (even as it accrues interest!) as long as your withdrawn funds go towards qualified medical expenses. With a critical illness/injury plan, you can add a benefit amount of up to $25,000 for yourself (and $25,000 for your spouse and $25,000 for dependents) to cover massive medical bills in case of serious injury or prolonged illness (which might not be covered completely by your regular insurance policy).
Deduct Health Insurance Premiums on Income Taxes
One of the biggest tax benefits of being an independent contractor is the ability to deduct the cost of your health insurance premiums on your income taxes. If you were not offered health insurance through an employer or through your spouse and had no choice but to purchase individual health insurance, then this expense is most likely tax-deductible.
Don’t forget about this tip when it comes time to file taxes next year – you could potentially save thousands of dollars on your tax bill with this valuable deduction!