This isn’t a PSA for ACA open enrollment because honestly, if you can’t afford health insurance right now, you can’t afford it.
What I’m here to tell you is that even if health insurance seems like an expense too far today, eventually, it should be within reach.
I’m mostly talking to those of us who don’t have insurance options through an employer and who live in a country foolish enough not to provide simple, accessible, non-employer-dependent coverage to all its citizens. But really, it can apply to any basic life expense —rent/mortgage, student loan payments, credit card debt, retirement contributions — even if you can’t imagine affording those things today, as a freelance business owner, you should be ready to aim for “one day”.
That’s because of what freelancing actually is.
Freelancing isn’t struggling to make a way in a dying industry or being forced to suffer with low-paying clients. Freelancing is taking ownership of your work life.
It’s taking on the business responsibilities that employers tend to offer and picking them up yourself —along with your freedom, control, and flexibility.
The Fear of Health Insurance
One of the most expensive and intimidating responsibilities that freelancers take on is health insurance.
I talk to plenty of aspiring freelancers who’re terrified of making The Jump because of the cost of insurance. And you know what? They have every reason to be concerned.
Missing an insurance payment might not mean you’re homeless or something’s getting repossessed, but it can mean life-threatening and finance-destroying catastrophe if you have an accident or a health issue at the wrong time.
And that’s why I want you to set covering your insurance expense as a goal for your business.
It’s a major confidence builder since it’s one of the most concrete employer responsibilities you can take back. Once you conquer the insurance giant on top of your other bills, you start to look at things different.
But first, it’s important to understand what you’re trying to do.
The Real Cost of Health Insurance
Insurance is a black box in the U.S.
We’re technically covering it ourselves, but not really. Employers pay a good chunk as an add on to our compensation (thanks to WWII). I’ve seen claims ranging anywhere from around 50% to 80% of the cost of group insurance. That means we’ve got a decent amount of ground to make up as employer-independent workers.
Instead of starting there though, let’s go with some raw numbers for individual insurance (which can actually be cheaper than group insurance, before employer contribution is factored in).
For an individual, the average cost is around $440 per month. For a family of four, it’s $1,168.
If those numbers make you want to sit down and take a drink, you aren’t off base. They’re pretty serious. But if you’re walking away from the shelter of employment, they’re numbers you should be able to face head on.
How do you do that?
You know I push the $75/hr floor as a goal around here. That’s because that’s what you should be looking at to cover the benefit package most full-time employers provide. It’s also what you should be passing on to your clients as a cost of doing business. (So raise your rates on that next client to shave off some of your insurance fears.)
A Formula for Health Insurance
So let’s turn those numbers into something practical.
Let’s say you’re generally healthy (by insurance standards), averaging $75/hr. Let’s also assume a moderate ~30% tax rate for income and self-employment tax. You should be able to cover your individual insurance in about one, 8-hour day’s worth of production. For a family of four, you should be able to do it in about 3. (This depends on whether you use $75 as your standard for your overall average rate or production rate, but you get what I’m saying.)
And those estimates above are ceilings. They plummet as you raise your rates and get more efficient. (These days I can cover my premium in a couple hours.)
So what about you? Can you set a target of bringing in 1-3 days of work each month to cover your insurance bills? Can you work on getting your average hourly rate up so that it takes even less effort to cover your insurance? I think you can. I know you can.
If you’re working with a deliberate strategy that prioritizes income (and peace…we can’t be miserable doing this), affording insurance is very doable.
So yeah, you should be able to afford health insurance.
You should eventually be able to swing any average expense, whether that’s a car payment, $7/month at BlackFreelance, or that 4-figure certification that you know will allow you to raise your rates.
If you feel like you can’t, here are a few posts that will help.
And if you want to get the most out of your freelance work, check out the Niche Asset Assessment after you sign up for the Start Strong newsletter. Talk to you later!