Self-employment is an important career choice for many people, and it is an option elected by many seniors and baby boomers. But with this choice comes the need to provide your own health insurance, which can be a formidable expense. And, thanks to the Affordable Care Act, a necessary one starting in 2014. If you are self employed and are seeking health care coverage, here are your major options.
If you have a spouse or partner who is or can be enrolled in an employer-sponsored plan, joining this plan is usually the simplest and least expensive way to maintain coverage. Nearly all employer-based plans offer coverage to spouses and children, and many provide coverage to domestic partners as well.
If you formerly were employed by an organization that employed 20 or more people and made a group health plan available to employees, you may be able to obtain medical coverage through the federal Consolidated Omnibus Budget Reconciliation Act, known as COBRA. COBRA requires employers to make available to departing employees the option of continuing membership in an employer-sponsored group medical plan at the employee's expense. You can continue your health insurance under COBRA for yourself and your dependents for 18 months, during which time you can search for the best option as a self-employed person.
High-deductible plans (HDPs), as their name suggests, involve a high deductible or threshold below which you must pay all costs. For 2014, minimum deductibles are $1,250 for an individual and $2,500 for a family. In essence, a high-deductible policy provides coverage for catastrophic situations but does not generally provide for regular doctor visits and routine care. Such plans can involve complex cost-sharing arrangements in which certain procedures or visits are covered only in part. When considering this option, factor in not only monthly premiums but also the costs of partial out-of-pocket payment for different procedures.
Combining an HDP with a tax-free health savings account (HSA) can also save you in taxes. You deposit pre-tax dollars into your HSA, and use that money to pay medical expenses that aren't reimbursed by your health insurance.
You may be able to save money by enrolling in a group plan sponsored by a professional organization. Check with any affiliations you may have (for example, the American Medical Association or a state bar association for attorneys) to see if they offer group rates for members. As with any plan, you'll need to look at not only costs but also deductibles, co-pays, and how well the coverage meets your needs.
Many states now have health insurance marketplaces. The federal marketplace has an up-to-date list and provides insurance referrals to consumers whose states do not have their own websites.
For many self-employed individuals, their best option will be to enroll directly in a health maintenance organization (HMO) or preferred provider organization (PPO). In general, HMOs tend to be more expensive than PPOs, but plan costs vary considerably with coverage options, so shop around. Also keep in mind that individual enrollment in a plan is likely to be expensive, often $500 or more per month for individual coverage, and that costs are generally not tax deductible.
When shopping for the right plan, make sure to do your homework. Compare premiums, coverage, deductibles, and copays. Also keep in mind that after you turn 65, you may be eligible for Medicare benefits, even if you remain self employed.
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