Health Insurance for Freelancers: Your Actual Options

Health insurance is the thing that keeps a lot of people from going freelance. On a W2, your employer absorbs most of the cost and you barely notice it. On your own, you are looking at $400 to $700+ per month for an individual plan before you have used it for anything.

There are real options. Some are better than people realize. Here is how to think through them.

The ACA Marketplace (usually the starting point)

The Affordable Care Act marketplace (healthcare.gov) lets you buy individual health insurance on your own. Plans are organized into metal tiers: Bronze, Silver, Gold, Platinum. Bronze has the lowest premium and highest deductible. Platinum is the opposite. Silver is usually the sweet spot for most people.

The part most freelancers do not know: if your income is below 400% of the federal poverty level (roughly $58,000 for a single person in 2024), you likely qualify for premium tax credits that significantly reduce your monthly cost. At some income levels, you can get solid coverage for under $100/month.

One important detail: marketplace income is based on your modified adjusted gross income, which means after your self-employment deductions and retirement contributions. If you contribute significantly to a SEP IRA or Solo 401(k), your reported income could be lower, increasing your subsidy eligibility.

COBRA (short-term bridge)

When you leave an employer, you can continue your employer-sponsored coverage through COBRA for up to 18 months. The catch: you pay the full premium including the portion your employer used to cover. COBRA is often $600-1,200+ per month for an individual.

COBRA is useful as a bridge while you figure out your permanent solution. It is rarely a long-term answer because the cost is brutal.

Timing note: you have 60 days from losing coverage to elect COBRA. If you miss the window, you cannot go back. And you can drop COBRA at any time without penalty if you find a better option.

A spouse's or partner's plan

If you have a spouse or domestic partner with employer-sponsored insurance, joining their plan is almost always the best option. You lose employment or your hours drop as a qualifying life event that lets them add you mid-year. Employer-sponsored plans are typically subsidized more heavily than anything you can get on the individual market.

Professional associations and groups

Some industries have associations that offer group health insurance to members. Freelancers Union (freelancersunion.org) is one option open to many independent workers. National Association for the Self-Employed (NASE) is another.

The coverage and pricing vary significantly. Worth comparing to the marketplace. Not always better, but sometimes is.

Health sharing ministries

These are not insurance in the traditional sense. Members share costs with each other when someone has a medical need. Examples include Sedera and Liberty HealthShare. They are significantly cheaper than traditional insurance (often $200-300/month for an individual) but come with important caveats.

Limitations: they typically exclude pre-existing conditions for a period of time, have sharing guidelines (rather than guaranteed coverage), and are not subject to ACA protections. They work well for healthy people who want catastrophic protection and are comfortable with the model. They are not for everyone.

HSA-eligible plans

If you choose a high-deductible health plan (HDHP) on the marketplace or elsewhere, you can open a Health Savings Account (HSA). An HSA lets you contribute pre-tax money for medical expenses. For 2024: up to $4,150 for individuals, $8,300 for families.

HSA contributions are one of the few triple-tax-advantaged accounts available: tax-deductible contributions, tax-free growth, tax-free withdrawals for qualified medical expenses. If you are healthy and do not use much healthcare, an HDHP plus HSA can be a strong combination.

The self-employed health insurance deduction

The IRS lets self-employed people deduct 100% of health insurance premiums paid for themselves, their spouse, and dependents. This deduction comes off your gross income before calculating income tax (though not self-employment tax). It can be significant.

At $600/month in premiums, that is $7,200 per year deducted. If you are in the 22% bracket, that saves you about $1,584 in income tax annually. This is a meaningful offset to the cost.

How to actually choose

Start at healthcare.gov during open enrollment (November 1 to January 15 for most states). Put in your expected income for the year and see what you qualify for. Compare the Silver plans. If the premiums after subsidy are reasonable and the network includes your doctors, that is probably your answer.

If you are healthy and want lower premiums, look at Bronze or HDHP options paired with an HSA. If you use healthcare regularly, Gold or Platinum's higher premiums but lower deductibles can be worth the cost.

Special enrollment periods apply when you lose other coverage (COBRA, employer plan), so you are not stuck waiting for November if you go freelance mid-year.