Health Insurance For The Self-Employed Top Concern
For the self-employed, the joys of entrepreneurship are often tainted by worries about health insurance. Whether an individual is about to make the move from having an employer to being self-employed or has been operating as a sole proprietor or small business owner for some time, the expense of health insurance is a major concern.
Individuals who elect to take leave their current employer and become self-employed can preserve their health insurance coverage (if they indeed had employer-supported health insurance) by signing up with the Consolidated Omnibus Budget Reconciliation Act (COBRA). This program allows workers to extend their employer-based benefit for up to 18 months after they leave their job. The newly self-employed should be prepared, however, for a large health insurance premium, perhaps as much as 50 to 80 percent of the plan’s total cost, because their employers are no longer picking up that portion of the insurance cost.
One important consideration for people who qualify for COBRA and who enter the self-employment arena is that they cannot be denied coverage for any pre-existing condition as long as they are with COBRA. Once those extended benefits run out, however, they are at risk of being turned down for a new health insurance policy because of pre-existing conditions.
Once COBRA runs out, or COBRA was never an option, the self-employed can explore purchasing an individual health insurance policy on the open market. The cost of such plans varies considerably, and they also depend on whether the person needs a single or family policy.
Self-employed individuals who have a spouse who has employer-supported health insurance may be able to secure coverage on that plan. Being added to a spouse’s health insurance plan may not always be as cost effective as getting one’s own insurance, so it pays to explore an individual health insurance option as well. One potential advantage of being added to a spouse’s existing policy is that there frequently is no limitation regarding pre-existing conditions.
Association-endorsed or association-related health insurance plans are another option. Examples include the National Association of Self-Employed and AARP (for people older than 50). Specialized groups, such as the Author’s Guild, the Freelancers Union, and other industry-specific trade organizations, offer a group health insurance plan for its members. Such associations exist for many different employment arenas and may offer premiums and plans that are somewhat better than an individual plan.
Lastly, to help take the sting out of high health insurance costs, the self-employed can deduct the cost of their health insurance premiums from their federal taxable income as a business expense. Sorry, you cannot write off more than your actual income, and with today’s skyrocketing health insurance premiums, this may be a reality for some struggling self-employed individuals.
National Association of Self-Employed