Group and Individual Health Insurance Options for Independent Contractors

Whether you are contemplating making the leap to independence or are new to the independent workforce, you have likely grappled with how you will manage benefits without traditional employment. Health, life, disability and other types of insurance are among the perks of a corporate career. Below we outline some of the health insurance options available to self-employed professionals along with the pros and cons of each option.

Health Insurance Coverage for the Self-Employed

Group Coverage

As a traditional employee, your benefits were through a group plan. Group plans provide coverage to a select group of people, such as an employer or association, under a master policy. The group is the insurer and the benefits are extended to its members. All members of the group are offered the same benefits. Because risk is spread across the entire group, these plans tend to cost less than individual plans. As a traditional employee, your employer pays a share of the cost of your coverage, further reducing your financial responsibility.

Group plans, however, are an alternative to individual healthcare plans for independent workers. You can access group plans by joining groups or industry associations such as chambers of commerce or AARP. MBO Partners also offers group insurances to independent professionals.

Pros

Group coverage is more comprehensive and that means regulations will require these plans to cover most major health circumstances. A larger market for the plan means you’re likely to receive more attention from the insurance company. With a group plan, you can also turn to a benefits manager to help answer questions.

Cons

Group plans are required by state laws to meet coverage level requirements. For example, while you may not need maternity or pharmacy coverage, someone else on the plan does so the plan must cover those services. Therefore, it can be more expensive than an individual plan that has carved out those specific benefits.

Premium fluctuations are driven by group usage, so even if you don’t use the plan, you could pay more for subsequent use due to your coworkers’ high usage.

Individual Coverage

Individual plans allow you to purchase coverage directly from an insurance provider. With individual plans, you have a wide range of options regarding the type of coverage, deductibles, and co-payments. For example, with individual health insurance, you may opt for a plan that does not cover routine physician visits or one that covers physician and hospital visits but does not have prescription benefits.

Because the coverage is individualized, the monthly premiums will vary based on the options you choose and your personal health history. The cost of an individual plan is generally higher than that of a group plan.

Pros

Individual plans can be cheaper for healthy individuals. Because individual plans aren’t required to meet certain state and federal requirements, there is flexibility on what is covered in the plan. You can carve out specific coverages that you may not need, lowering your cost.

Cons

Individually underwritten plans will be priced based on your health history. This can be good for you if you and your family have a good health history, or potentially bad if that’s not the case. Annual premium adjustments are also based on your usage, which could be a benefit—until you use the plan.

As a single entity, it can be hard to get the attention or service you need when an issue arises. Gaps in coverage and unclear policy terms can leave you surprised at a lack of coverage when you need it most. In order to find an individual plan that will work for your needs, you need to dig in and roll up your sleeves to understand exactly what you’re purchasing.

Other Insurances: Life and Disability

Life Insurance

As an independent professional, individual life insurance plans offer flexibility and personalized coverage. In contrast, group plans frequently come with limitations. With an individual plan, you have complete control over the plan and benefits, allowing you to choose a plan that meets the needs of you and your family.

Disability Insurance

Independent workers can also purchase individual or group short- and long-term disability plans. These plans provide “paycheck protection” in the event that you are injured and unable to work.

How to Purchase Insurance

When reviewing and purchasing insurance policies, you can either go through a trusted state-licensed insurance broker who has access to various plan options—or start by identifying the plan that best suits you and then either purchase from the insurance carrier directly or through a broker who has partnered to sell policies with the carrier you’ve chosen.

When it comes to benefits, you get what you pay for, making it important to understand the details of the plan you choose. Be sure to consider what isn’t in the policy to make sure your needs will be fully covered. Also, be aware that insurance options will vary by state.

For more information about health insurance options, check out our blog post, guidance from the Small Business Administration (SBA), and Healthcare.gov.

Looking for a broad range of insurance options? Check out MBO’s partnership program with InsurChoice, powered by NFP.  InsurChoice allows customers to shop competitive rates from many nationally recognized carriers for all types of insurance products, including auto, home, dental, renters, home warranty and even pet insurance. 

This content from MBO Partners does not constitute legal or financial advice.