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Health Insurance When You’re Self-Employed
There is plenty to love about being self-employed. You have more freedom and flexibility, and there are no limitations on your earnings in many cases.
That doesn’t mean it’s not without challenges, however.
For example, what do you do about health insurance when you’re self-employed?
If you’re temporarily self-employed, there are short-term insurance options like COBRA. What if being self-employed is your long-term career, however?
There are options and some ways to save, so the following are things to keep in mind.
Know Your Options
When you’re self-employed and looking for health insurance, you have a few primary options available to you.
There is the Health Insurance Marketplace for one. You can go there and learn more about marketplace plans available in your state.
You can also find out whether or not you qualify for tax credits or lower insurance premiums. And if you qualify for certain types of medical care assistance, you can find that out by looking at your state marketplace.
There are also private insurance options. Some companies have self-employed insurance options, and if this is what you’re most interested in. It can be a good idea to speak to an insurance agent who’s not affiliated with any one company and find the most affordable plan that offers the needed coverage.
There’s a less commonly utilized option as well—health care sharing ministries. These aren’t the same as insurance, but they are instead a way for people affiliated with a group such as a church to pool their money.
Then pay for health care costs for other people in the group. There are restrictions to this option; however, such as the fact they don’t have to cover pre-existing conditions.
Look Into Organizations for Self-Employed Professionals
When you work for a company, there can be a sense of security. You can speak with HR or your manager about concerns you may have, including issues with health insurance.
You don’t have that safety net when you’re self-employed, but there are professional groups that can be helpful to join.
For example, there is the Association for the Self-Employed. Not only do you have access to a support network, but sometimes these groups offer access to health insurance plans at a discount.
The Self-Employed Health Insurance Deduction
The self-employed tax deduction is available for some people who pay their own health insurance. If you qualify, you can deduct 100% of your health insurance premiums. But it’s not a business deduction. It doesn’t apply to self-employment taxes.
Qualifications require that you don’t have any other insurance coverage, so for example, you can’t take the deduction if you’re eligible for another health insurance plan.
You must have business income as well because you can only deduct as much as you earn from a business. If you operate at a loss, you don’t qualify.
Start a Health Savings Account
A health savings account or HSA is an alternative to traditional health insurance policies. You link an HSA to a high-deductible health plan. This means you pay for certain medication expenses with a separate account.
You would usually have a debit card with your health savings account, so then you would pay for your medical costs with that.
If you have an individually-owned health savings account, it can save you anywhere from 20% to 30% on medical expenses.
You contribute the account as much as you want or as little as you’re able to, and the only guideline is that you have to spend everything in that account on qualified medical expenses, so you don’t have to pay taxes on it.
If you earn interest on the money in the account, it’s tax-deferred, and if you spend the money on medical expenses, then withdrawals are tax-free.
Should You Get Catastrophic Coverage?
Sometimes self-employed people will opt just for catastrophic coverage, so they pay lower premiums.
However, with the introduction of the Affordable Care Act, there were a lot of changes to catastrophic plans and fewer are available.
If you are under 30, you may still be able to purchase what was traditionally viewed as a catastrophic plan.
If you’re thinking about this, you aren’t eligible for federal subsidies, and there are limits on the number of primary care visits you can have and preventative services before you’re deductible applies.
You may find when doing the math as a self-employed person that something like a bronze plan from the Health Insurance Marketplace may end up being less expensive.