Self-employed or considering it? Here’s what you need to know about health insurance

You may already be self-employed or you may be considering going self-employed. One thing that you quickly realize once you are working for yourself is that in addition to all the other responsibilities, you are responsible for procuring your own insurance benefits. You no longer have an employer who is providing these insurance benefits for you.

Often the employee group benefits plan that you may have had previously would include such benefits as; life insurance, accidental death and dismemberment (AD&D), disability insurance (LTD), health and dental insurance, perhaps some critical illness insurance, and maybe even a health spending account (HSA).

These are all insurances you should be aware of and understand, but one that is foundational is health insurance – this article will focus on health for now.

Two different scenarios

There are two different scenarios and depending on which one applies to you will determine the best approach.

Scenario #1: You are in the midst of transitioning to self-employment

At some point when you leave your employer, your employee group benefits will terminate, leaving you uninsured. From a best practices standpoint, it's important that you try to minimize any “gap” in coverage.

How do you do you avoid a 'gap' in coverage?

The sooner that you seek to replace your health insurance benefits, the more choices you will have available to you. There is some time sensitivity here. This is because some options that are available to you initially may not be available after a period of time. This is particularly important if you have “pre-existing conditions” - that is a health condition for which you are (or have been) treated for or are taking medication for. By waiting too long you may find that the only options remaining will either exclude your pre-existing conditions (i.e. not cover them), or offer minimal coverage at a relatively high cost - neither of which are ideal.

There are three main types of health care plans that you should be aware of, you can read more about those in the guide we’ve written here. To briefly summarize the three types there are: Medically Underwritten plans, Guaranteed Issue plans, and Guaranteed Acceptance plans.

If you are transitioning from an employee group benefits plan, you have the option to apply for any of these three types. In other words, you have the most choices available to you at this stage.

Ok, which plan type is the most appropriate?

Best practice would be to first apply for a Guaranteed Issue health care plan. Depending on the insurance company you can apply for this type of within 60-90 days of your employee group benefits terminating (some insurance companies offer 60-days, others 90-days). By applying within 60-90 days, you can transition seamlessly without needing to answer medical questions that may result in “exclusions” for any pre-existing conditions that you may already have.

Once you have a Guaranteed Issue plan in place, you can then at your convenience apply for a Medically Underwritten plan. A Medically Underwritten plan will offer the most coverage at the lowest relative cost, and is therefore the ideal plan type for a person to be on long term, but it is also the most difficult to get.

Scenario #2: You've been self-employed for a while already

If you've been self-employed for a while already, it means you are probably already outside of the 60-90 day window that we've discussed. This means that you will be unable to transition seamlessly to a Guaranteed Issue plan without first answering medical questions. At this stage there is no advantage to applying for a Guaranteed Issue plan, therefore this leaves you with two options that makes sense: Medically Underwritten plans, and Guaranteed Acceptance plans.

If you've been declined coverage in the past due to your health history, then a Guaranteed Acceptance plan will be most appropriate. Otherwise, you will be better off applying for a Medically Underwritten plan as this will offer you the best coverage and value, but it means you will need to answer some medical questions, and any pre-existing conditions you may have will likely be excluded from coverage.

Summary

To recap;

• As a self-employed individual it's incumbent on you to get health insurance benefits for yourself. No employer to do this for you.
• If you're an employee (or recently left employment): consider starting with a Guaranteed Issue Plan. There is time sensitivity (60-90 days) to make this transition.
• If you've been self-employed for a while: consider starting with a Medically Underwritten Plan. Or, if you've been declined coverage in the past (or you've received an offer with more exclusions than you're comfortable with) then consider a Guaranteed Acceptance Plan.

Next steps

Trying to understand all the different plan types and figuring out which plan is most appropriate for your unique personal circumstances can be time consuming and difficult. This is why we have built Aeva.

We've designed Aeva to make this process easy and save you time by asking you specific questions to understand your unique personal circumstances and then providing a curated list of plan choices for you to choose from that are most appropriate for you. Aeva is your guide.

You can get started with Aeva today by clicking here.

Want to chat? Professional advisors are available to help you.

We look forward to assisting you with your health insurance needs.

Thanks for reading!