Reader Jessica pleaded for ideas to get affordable health insurance on the BargainBabe.com Facebook page because she is a new independent contractor and needs coverage. Jessica is frustrated and I can totally relate! I was dropped from my father’s health insurance when I turned 26 and am now in the process of finding insurance, too.
If you’re self-employed like Jessica and I, you must get your own insurance. These are five options for health care if you are self-employed:
- COBRA – If you get laid off take advantage of COBRA, which allows you and your dependents to remain on your employer’s insurance as long as you pay the full premiums (including the employee’s and the employer’s portion). You’ll be covered for as long as 18 months and your dependents for 36 months if you begin paying for COBRA within 60 days after your job ends.
- Fee-for-Service Health Plans – This is a traditional health care policy. Health insurance companies pay fees to service providers for the care they give to people covered by the policy. This type of health insurance offers the most choices of doctors and hospitals. You can choose any doctor you wish, change doctors any time and you can go to any hospital in any part of the country. The downside is it is one of the most expensive options. You’re on the hook for a monthly premium, have to cover a deductible, and are responsible for a percentage of the bill.
- HMO (Health Maintenance Organization) – This is a prepaid health insurance plan. You pay a monthly premium and the HMO covers your doctors’ visits, hospital stays, emergency care, surgery, checkups, lab tests, x-rays, and therapy. You must use the doctors and hospitals designated by the HMO.
- PPO (Preferred Provider Organization) – A combination of traditional fee-for-service and an HMO. When you use the doctors and hospitals that are part of the PPO, the insurer covers a larger part of the bill. You can use other doctors, but it will cost more.
- HDHP (High Deductible Health Insurance Plan) – This is an insurance plan with lower premiums and higher deductibles than traditional plans. HDHP is a requirement for Health Savings Accounts (HSA), which are similar to IRAs. You can avoid taxes with a traditional IRA; contributions to an HSA are pre-tax. Money in your HSA can be used for medical expenses. If this money is not used by age 65, you can use it to supplement your retirement.
Whatever plan you choose, make sure to get in writing what is covered and what you’ll be paying for. Quit smoking and you’ll save thousands of dollars a year and get an insurance discount. Other healthy habits that get you a discount include drinking moderately and being within your weight range.