When most of us hear the word, “insurance” our eyes glaze over and our mind starts to get fuzzy. Insurance, specifically health insurance, is complicated and confusing, and most self-employed people prefer to delay having to think about it… until it’s too late.
In this article, small business owners and insurance providers across the country offer their advice on how to keep health care costs down for the self-employed. Remember, no matter which path you take, insurance costs can be tax-deductible as a business expense!
High Deductibles Increase Your Monthly Cash-Flow
Erik Lehtinen of Integrative Wealth recommends high-deductible plans to bring down the monthly cost of insurance premiums. The higher your out-of-pocket expense for any kind of claim, the lower your monthly rate will be. This is true with any health-care plan, no matter where you sign up.
To further decrease costs, if you are able to forego preventative or maternity care and just receive catastrophic insurance for emergencies, your premiums will be much lower as well.
Catastrophic Insurance (High-Deductible Health Plan — HDHP)
Catastrophic Insurance is just that: for emergency use only. If you get the sniffles, or want a cosmetic procedure, chances are you won’t be covered. However, if you get mauled by a lion at the Zoo, or otherwise encounter an accident, the insurance will cover the necessary expenses. Each company that offers catastrophic insurance has it’s own guidelines, stipulations, and requirements, so be sure to read through your plan thoroughly and ask questions.
Barry Maher is a self-employed speaker that prefers his catastrophic plan. Although it has a $5200 deductible, it allows him to have a Health Savings Account for non-emergencies. This way, he can use his HSA for minor illnesses, and to pay the deductible of the HDHP in the case of a true emergency.
Health Savings Accounts (HSA)
Health Savings Accounts are available to those who enroll in a catastrophic, high-deductible health plans (HDHP). Money deposited into a HSA is not subject to federal income tax at the time of the deposit, and funds roll over year to year if they are not spent. These funds can only be spent on qualified medical expenses, but they come without federal tax liability or penalty. This also includes medications with a doctor’s prescription. If you are collecting federal or state unemployment, you can use your HSA to pay your health insurance premiums.
If, at some point, you lose your HDHP insurance, you’ll still have access to your HSA, but won’t be able to contribute additional money to it. In the case of death, you can name a beneficiary.
Using Auto-Insurance as Catastrophic Insurance
Talk to your car insurance provider to see what kind of medical benefits they offer if you get into an accident. This option is good for people who live a healthy life, but want to be protected while out on the road. Beware: even if you get hospital coverage and loss wage coverage due to an accident, this type of insurance won’t help you if you get an illness. This is purely accidental coverage.
Generally, auto insurance coverage applies to the injured, no matter who was at fault. Additionally, automobile medical insurance can pay for, partially or completely, your health care insurance premiums. Medical payments through an auto insurance plan typically over doctor visits, hospital visits, surgery, x-rays, EMT and ambulance fees, nursing services and care, prostheses as well as funeral costs.
Health Insurance Through Memberships
Those who are self-employed can seek insurance benefits through a variety of membership organizations. These organizations pool together their resources and are able to get discounts on premiums and care that individuals don’t have access to.
Members CU, a Credit Union based in Traverse City Michigan, offers a variety of health, auto, and life insurance to its members. If you’re currently a member of a credit union, check to see if they offer similar benefits. (It’s another great reason to move your money from big banks!)
The National Association for the Self-Employed offers group health benefits for its members, as does the A.A.R.P.
The Alliance for Affordable Services represents nearly 80,000 individuals and small business owners nationwide and provides discounts on legal, health, and personal financial services.