FAQs on self-employed health insurance
What options are there for the self-employed or sole proprietors to provide health insurance for their families?
First would be to buy an individually-underwritten policy on the open market. If your family health history is clean its simply a matter of finding a policy which offers the mix of benefits and costs which you are most comfortable with. There is no such thing as cheap health insurance -- make sure to choose a plan with adequate benefits to protect both your family and your assets. Most bankruptcies in this country are caused by unexpected medical emergencies combined with inadequate protection -- this may be an even bigger issue as you grow equity in your business and have more to lose.
Are there other ways for the self-employed to keep health insurance -- especially if there is an issue in the health history of one of the family members to be covered?
Spouses often work outside the family business, just to keep health insurance and other benefits. In doing so these spouses can often keep their families covered under an employer's group health insurance plan, which is not individually underwritten meaning that insurance usually cannot be denied or premiums rated-up because of health history.
Guaranteed Issue: With Healthcare Reform, plans offered in the USA are now called "guaranteed-issue" health insurance, which means companies doing business in your state must offer you insurance regardless of your health history. Check with a health insurance professional in your state before dropping any coverage you already have.
Can the self-employed deduct the cost of their health insurance premiums?
Yes! Thanks to recent changes in tax law, the self-employed can now deduct the cost of their health insurance premiums from their federal taxable income (not to exceed the amount of their actual income -- in other words, you can't use your health insurance premiums to show a loss for your business). This puts the self-employed on equal footing with big business, which has long been able to count health insurance premiums as a business expense.
What is COBRA and what can it do for the self-employed or the sole proprietor?
Its an acronym for the "Consolidated Omnibus Budget Reconciliation Act." If you work for an employer with 20 or more employees, and you leave that job, COBRA requires the employer to offer you the opportunity to continue your company health insurance for up to 18 months. However, while on COBRA you must pay both your normal health insurance premiums, PLUS the amount your employer normally paid. This can provide a way for someone to test the self-employment waters while maintaining health insurance coverage. Make sure to check ahead of time what your options are getting health insurance coverage once your COBRA eligibilty ends. Some states offer the ability to move without predjudice to an individual market plan after your COBRA eligibity has expired, provided that you have not let your coverage lapse. Again, check with a licensed insurance professional versed in the laws of your state for advice.
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