Where to Self-Employment Health Insurance
Anyone who is fortunate enough to have a full-time job that provides health benefits probably gives little thought to their health insurance other than grumbling about the premiums. But those who are self-employed, work part-time, or otherwise don’t have health insurance provided as a benefit are living in an entirely different world.
I don’t need to tell you that the health care industry is a complete mess in this country, and given the skew toward employer-sponsored plans and plans varying from state to state it can be a nightmare for those looking to purchase their own health insurance. But for many people their only option is to head out on their own to try finding the best plan for themselves or their family.
Start With a Health Savings Account
While this isn’t exactly insurance, it can be a cost-effective way to mitigate your health care expenses. A Health Savings Account, or HSA is a personal account you create that allows you to set aside money for health care costs. What makes these accounts attractive are the tax benefits. With an HSA you are allowed to deposit money into an account, deduct the contributions, and allow it to grow tax-deferred and withdraw the money tax-free if done so for a qualified medical expense. Some expenses that qualify are: dental, vision, preventative care, baby wellness, and even insurance premiums, deductibles, and co-payments.
This is where the HSA can shine even if you plan on buying a health policy at a later date because you can use the money saved to apply toward those premiums. So, you’ll get a tax break on the contributions and a tax break on any gains within the account which can then be used to purchase the insurance. So, at the very least your first step in finding health insurance should be to establish an HSA.
For younger and relatively healthy individuals this may be the only coverage needed, but please keep in mind that it depends on what you can personal save. It won’t help you if you suddenly find yourself seriously ill and in the hospital or have an accident. But if you’re someone who doesn’t have any existing health issues and need little more than regular checkups, the HSA is a great starting point that will cover most of your bases and could mean you can save money on piggybacking a high-deductible health plan as a backup in the event of a major health issue.
Look for Group or Association Plans
Your next plan of attack should be to begin looking for group plans you may be eligible for. Group plans are usually the least expensive since the plan covers a large number of participants which spreads out the risk for the insurer. Even though you may not be employed by a company that offers a group plan, there could be opportunities out there.
You’ll need to think about what groups or associations you can identify with. Anything from your college alumni association to your local chamber of commerce. As strange as it may seem, even discount shopping clubs like Sam’s and Costco may provide insurance options. The group plans are out there, but you’ll have to do a little digging to see what’s available to you and your state. If you’re self-employed, don’t forget to check with the National Association for the Self-Employed for additional resources.
Finding Health Insurance Quotes
After you’ve exhausted your resources or have found some possible insurance plans it’s time to start looking for online insurance quotes. Health insurance premiums vary widely and even though you may have found a suitable group plan you won’t know how good the price is until you can compare it to other options. Another online quote resource is at eHealthInsurance where you can compare dozens of quotes for your situation.
Health Insurance Tax Breaks for the Self-Employed
If you’re self-employed you can ease the pain of high insurance premiums a bit thanks to some tax breaks. If you have self-employment income that’s claimed on Schedule C or F, are a member of an LLC, or own more than 2 percent of an S-Corporation, then you can take a deduction for health insurance expenses incurred for yourself, your spouse, and your dependents. Given the often high premiums for individual insurance policies this can be a nice tax deduction for your business.
It does get tricky if you have a working spouse who is eligible to participate in a group plan. As long as you are eligible to be covered under this plan, whether you opt to or not, these tax deductions for the self-employed go away for any months you were eligible for that plan.
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About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.