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Owning a photography business is all about having the independence to be creative and pursue your dream career. However, the self-employed lifestyle can often feel very risky.
Standard, 9-5 desk jobs have employer-provided benefits that independent opportunities don’t, and when it comes to buying something like health insurance, photographers are often left with a lame-duck binary choices: are you feeling risky or are you feeling risk-averse?
Health Insurance: Reducing Risk
Fortunately, recent policy changes have at least made one of these benefits accessible to freelancers: health insurance. Before the Affordable Care Act (aka “Obamacare”), personal health coverage was often impossible to afford. And with medical bills standing as the number one cause of personal bankruptcy in the U.S. (something as minor as a finger slammed in a car door can run up a $2,400 bill) an uninsured lifestyle was pretty implausible, too.
Thanks to Obamacare, Americans can buy their own affordable coverage–without an employer. It’s the key to security in an independent and creative lifestyle. Moreover, many freelancers qualify for government discounts, making plan prices very reasonable. In California, for example, people save an average of 75% on subsidized plans. Your eligibility is based on your expected 2015 income, and individuals who make between $11,670 and $46,680 usually qualify for savings.
All health insurance plans are required by law to make preventive care (a fancy term for services like annual physicals, flu shots, vaccines, mammograms, prostate exams, etc.) completely free. At no cost to you, these benefits help you stay healthy and can bring peace of mind. And while in the past people could be denied coverage for having a pre-existing condition, health insurance is now accessible to everyone. The only factors that influence the price of your plan are your age, gender, and zip code.
How Do I Sign Up?
Open Enrollment, the time of year when you can sign up for health insurance, typically ends January 31st each year. But don’t despair–you have a second chance! The government created a special enrollment period from March 15 – April 30 for people who didn’t know there was a sign-up deadline and got fined for not having coverage last year.
To purchase health insurance at any other time of year, you have to meet the requirements of a “qualifying event.” Fortunately, there are a lot of qualifying events; everything from having a baby to moving to a new city lets you buy coverage (get the full list of events here). If you recently ditched your desk job for a freelance career, you’re in luck — losing health coverage from your employer also counts as a qualifying event.
Tip: When you do sign up, make sure you have the right documentation on hand. Most insurance companies won’t process your application unless you have proof that you’re eligible for a qualifying event.
Whenever you sign up, make sure to explore your options! Don’t know where to start? Stride Health is one good resource. They compare private plans and government plans (think HealthCare.gov), and suggest the one that will save you the most money over the course of a year. You can sign up on their site in just a few minutes, and on any device!
Health Insurance Shopping Tips
- Evaluate your health. Take 15 minutes to evaluate your health costs for last year. How often did you see a doctor? Which doctors did you visit? Do you have any medical conditions or prescriptions? Understand that the cheapest plan isn’t always the best plan. If you have a lot of medical costs, you’ll save much more money by investing in a plan with a higher premium (monthly payment) because it will cover a larger percentage of your medical bills.
- Young & healthy? Go for an HDHP. A High Deductible Health Plan has a very low premium in exchange for a high deductible (the amount you pay before insurance kicks in). It’s a great option if you don’t have many medical expenses but want to make sure an emergency doctor visit won’t throw you into debt.
- Determine your expected income for the year. Reporting your income correctly will help you see if you’re eligible for a government-discounted plan. It will also help you avoid tax penalties; if you’re awarded a subsidy but make more money than what you originally estimated on your application, you’ll have to pay the government back at tax-time.
- Understand what you can afford. To prevent huge medical bills, buy a health insurance plan with a deductible you can afford. If an emergency happened and you had to pay all of your $8,000 deductible, would that send you into debt? If you can afford to spend a few extra dollars a month, consider picking a plan with a lower deductible to reduce your financial risks.
Extra Perk: Health Insurance Tax Deductions
Since you’re self-employed, you can deduct health insurance expenses from your annual income, lowering the amount of taxes you’ll owe. That’s more money saved for you!
Here’s how it works:
- Determine whether or not you’re technically self-employed. In general, you qualify as an independent contractor if your employer only controls the result of your work (you’re in charge of what is done and how you do it). For more specifics, check out the IRS’s definition of an independent contractor.
- Determine your eligibility. Different scenarios impact how much you can write-off. Learn the nitty-gritty rules here.
- Fill out the right form. Make sure to fill out Form 1040. On Line 29, you’ll find where to claim your health insurance deduction! Look out for the checkbox where you confirm you had minimum essential coverage all year (if that applies). If you’re nervous about completing the form correctly, this IRS guide walks you through line-by-line.
A few other tax tips:
- If you’ve had to pay some extra large medical bills not covered by health insurance, you may be able to claim additional deductions. As long as your health care expenses make up more than 10% of your income, you could qualify for a deduction.
- Try picking a health insurance plan with a Health Savings Account (HSA). Any money saved in your HSA is free from income taxes, and you use it to pay for doctor visits, prescriptions, and other medical costs. It’s a great supplement to your health insurance and an effective way to save. The money you put into this account rolls over into following years, so you can keep saving for as long as you like.
Go for it.
With the right health insurance plan, you’ll be free to stay healthier, happier, and always in pursuit of whichever career you desire.
Any other concerns or questions? Send them to firstname.lastname@example.org. We have a team of licensed agents ready to help!
Thanks to Stride Health for this insight! If you have any additional questions you can contact them directly!
*Stride Health is not a CPA or licensed tax consultant, and does not provide tax advice professionally through this communication or otherwise. This notice is to inform our customers and potential customers to consult their personal tax advisor on an issue that may be of relevance to them. Please don’t use this for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.