Finding affordable health insurance is crucial when you’re self-employed — but cutting corners on coverage can cost you in other ways. Here are some of the top things to consider as you choose a health insurance plan.
Last posted by Eric Huffman | benzinga
How It Works
Employer health plans offered as part of a benefits package may be paying as much as 80% of the coverage cost. When you’re self-employed, you’ll have to cover the premium expense yourself but there may be tax benefits that can reduce your out-of-pocket costs.
Premiums, Deductibles & Other Costs
When you get health insurance, you pay a premium and the insurer pays for part of the cost of your care. Typically, a health insurance plan has a deductible, which is an amount you pay out of pocket before your health plan starts paying toward your covered medical expenses.
Copayments or coinsurance are also common and require that you pay a fixed amount or a percentage of the cost toward your care. Because both deductibles and copayments or coinsurance are common with health insurance plans, you’ll still pay out-of-pocket costs in addition to your premium.
Where health insurance often shows its greatest value is in situations where your medical expenses are potentially high, like with an injury, illness or medical condition that requires expensive medication.
Under current law, health insurance providers can’t refuse coverage for preexisting conditions and plans compliant with the Affordable Care Act (ACA) can’t use your medical history as a rating factor in premiums.
You’ll find a maximum out-of-pocket cost with most health insurance plans, which puts a cap on how much you might pay if you need medical care. For ACA-compliant plans, the maximum out-of-pocket expense for 2019 is $7,900 for individuals and $15,800 for family plans. Often, you can reduce potential health care expenses by choosing a plan with a lower out-of-pocket maximum, although you can also expect premiums to be higher.
Health Maintenance Organizations & Enrollment Periods
Plans with higher premiums tend to provide more included services, more freedom to choose your doctor or reduced out-of-pocket costs. You’ll also be able to choose your network. The most common of these network types are health maintenance organizations (HMOs) and preferred provider organizations (PPOs). HMO plans typically offer lower premiums but restrict coverage to certain health care providers.
ACA-compliant health insurance plans are subject to enrollment periods, called open enrollment. If you’ve lost your previous coverage for one of a number of approved reasons, you can enroll in a plan under a special enrollment. Alternatively, short term health care plans are also available for periods of up to 12 months if you find yourself caught between enrollment periods.
Where to Look for a Policy
As one of the provisions of the Affordable Care Act, a centralized marketplace was created, commonly called the Exchange or the Health Insurance Marketplace. In the Exchange, you can shop for plans and compare basic coverage details like copayment requirements, deductibles, out-of-pocket maximums and network type (HMO, PPO, etc.) The Exchange is a handy place to compare for most consumers, but 12 states run their own health insurance exchanges and ACA-compliant plans for these states are available through these state-run exchanges.
Self-employed individuals may also find coverage options through a guild or association, although many of these organizations have stopped offering group health benefits. For example, Freelancers Union has partnered with Oscar Health, a relatively new health insurance company with ACA-compliant plans and short term health plans for self-employed freelancers.
You can also contact insurers directly. However, be aware that some insurer websites redirect inquiries back to the Marketplace where subsidies, if applicable, can be calculated.
Expect unsubsidized health insurance coverage options to start at about $300 for individuals and go up from there, depending on plan choice and individual rating factors like age, location and tobacco use. ACA-compliant health insurance plans are available in 4 metal tiers: platinum, gold, silver and bronze. Each tier represents a value level. Platinum covers the largest portion of your health care costs and bronze covers the least. Premium pricing for these plans also corresponds to the tiers. Platinum tier plans typically have the highest premiums.
A fifth category, catastrophic health insurance, is also available to applicants under 30 or those with a hardship exemption. Expect no-frills coverage and high deductibles, but premiums are low if you’re willing to pay for routine medical expenses out of pocket.
Subsidies may also be available for ACA-compliant plans, depending on your income and the number of dependents you have. HealthCare.gov provides a quick questionnaire that can help you understand how subsidies work and tell you if you might qualify.
Self-employment has its advantages, including a tax deduction for health insurance costs. You may be eligible to deduct up to 100% of the unsubsidized cost of your health insurance for you and your family. There are some basic rules to this deduction:
- You can’t deduct more than your earned income.
- The deduction is only available for months in which neither you nor your spouse was eligible for employer-provided health insurance.
- Only unsubsidized health care expenses are eligible.
The self-employed health insurance tax deduction is an above-the-line tax deduction, which means it’s available to you regardless of whether you itemize your deductions. It also means that it reduces your adjusted gross income, which may have other tax benefits.
Another option to consider if you’re self-employed is a high-deductible health plan (HDHP), which can provide a variety of tax benefits. The tradeoff is that the deductible for an HDHP is higher than average and you’ll have to meet the deductible before your plan begins providing coverage. These plans can be combined with a health savings account (HSA), which allows you to put away pre-tax money for qualified health care needs, including the deductible for a high-deductible health plan as well as copayments or coinsurance. If you don’t need to draw from your health savings account in a given year, the balance continues to grow tax-free in either an interest-bearing account or a low-risk investment account.
Pick from the Best Health Insurance Companies
Health insurance is regulated at the state level, so your options (and costs) can vary depending on your location. You’ll also find that many well-known health insurance providers only sell group health insurance, the type offered by employers, associations or trade unions.
What to Look for in a Policy if You’re Self-Employed
Every household has its own priorities. For some, lower premiums may be more important. For other households, a wide provider network or an insurer that covers your existing family doctor may be a priority.
The deductible is the amount of money you’ll have to pay toward your own health care expenses before your plan begins to cover health care costs. Some routine care may be exempted from deductible requirements, but some pricier health care expenses, like surgical procedures, blood tests or hospitalization are subject to your annual deductible. Choose a deductible that you’ll be able to pay.
Deductibles aren’t the only out-of-pocket cost associated with health insurance. Your plan may also have co-pays or co-insurance requirements for certain medical services. A plan with a lower out-of-pocket maximum can make your overall health insurance expenses more predictable.
A Wide Network of Providers
Even though health insurance is governed at the state level, you’ll have emergency coverage while traveling in other states. However, depending on the plan you choose, you may not have coverage for non-emergency out-of-network services while traveling. If you’re a frequent traveler or if you have family members living away from home, like kids in college, this can be a consideration.
HMO vs. PPO
The two primary types of provider organizations, HMO vs. PPO, can be a deciding factor for many households. HMO plans are usually priced more affordably but are also often associated with reduced choice in health care. PPO plans provide more flexibility in health care choices, including health care providers. However, you can expect to pay more for a PPO plan.
Choose the Right Self-Employed Health Insurance
The federal mandate to purchase health insurance has been removed but some states, like California, have passed legislation creating state-level mandates. Even where not required by law, health insurance is a wise choice because it limits your financial exposure due to health care needs. In many cases, we can find a way to pay the smaller expenses in life. Insurance is there to provide coverage for the larger expenses, the type of expenses that can change your financial health for years to come.
Weigh your options carefully and be realistic when considering factors such as deductibles and maximum out-of-pocket costs. These considerations represent real money you’ll have to spend toward your health care in addition to your premiums.
Original article can be found here…