"I'm self employed. How do I get health insurance with the new health care laws?"

(insurance_help_deskTake a second to laugh heartily at the picture and then let’s get to business.)

The health insurance world has been turned on its head courtesy of the Affordable Care Act, and reality has yet to settle in. But in the mean time I have felt anxious for all our self-employed friends, and I dedicate this blog post to you. May it be of help to you in your quest to find health insurance, now a legal requirement.

  1.  Do I need health insurance? : Yes, the law now requires everyone to have it.
  2.  Are there tax benefits in having self-employed health insurance? : Yes, you get to expense the cost of you and your dependent family members’ health insurance premiums as a business expense.
  3.  Are self-employed health insurance plans cheaper than individual health insurance plans? : From what I can tell the prices will be the same, ie, there is no discount just because you are self-employed.
  4. How much is health insurance going to cost me? : Unfortunately there is no way for me to answer this. And there is no way around it. You will simply have to sit down and do your homework. But read on; what I have to say will hopefully save time and headache.

In light of the new health insurance law, it seems everyone who doesn’t receive insurance from their employer has three options. They are:

1. Purchase Health Insurance from a Private Health Insurance Company. Yes, it is still available, only more expensive than before and with fewer options due to compliance to new regulations. Thanks to technology, there are many one-stop-shop websites such as ehealthinsurance.com that will allow you to compare many insurance company’s plans side by side. If you need a tutorial on how to read and understand insurance lingo such as copays, deductibles, coinsurance, and annual maximum, this youtube video gives an easy-to-understand walk through. Remember, picking a plan involves anticipating your medical needs because plans that cost more = more insurance benefit, and plans that cost less = less insurance benefit. The idea is, of course, to pay the least amount of money possible in combined premiums and medical bills, so that will take some consideration on how much you think you will need your insurance in a year, i.e. someone who anticipates having a baby will likely save enough money on medical bills with a higher benefit plan to offset its more expensive price tag.

2. Purchase Health Insurance from a Public Exchange (the government). The public exchanges are operated by the government but the plans are provided by private health insurance companies. Essentially everyone qualifies to use the exchanges. Some states have exchanges run by the state, and other states piggy-back on the federal exchange. Click here to find which applies in your state.

So the big question I had is: what is the difference between buying health insurance from a private company as opposed to from the exchanges which offer plans from the same companies? During my research I found a couple of intended differences. First, the exchange attempts to streamline the insurance shopping process and make comparison easier by categorizing all plans from all companies into 5 classes: bronze, silver, gold, platinum, and catastrophic. Second, it offers tax incentives and government subsidies to those that qualify (as determined by household size and annual income) that lowers the total cost of your health care insurance by either lowering the insurance price or increasing the amount of insurance benefit at no additional cost to you. (To determine if you would qualify for either of these subsidies you can use this subsidy calculator from Kaiser.) The marketplace will also help enroll you directly in CHIP or Medicaid if you qualify.

3. Don’t buy any Health Insurance and pay a penalty. For 2014 the fine for not having insurance will be $95 per person (up to a family maximum of $285, or 1 percent of family income, whichever is more). But the penalty increases by 2016 to  $695 per person, with a family maximum as high as $2,085 (or 2.5 percent of family income, whichever is greater).