Previously, I had written about what I had to consider in getting health insurance when I officially became self-employed. Paying for health insurance when you're self-employed is tough, but sometimes it's difficult to even find a health insurance carrier. Staff writer Miranda Marquit offers her two “cents” as a freelancer.
One of the challenges associated with working for yourself is obtaining adequate health insurance. Because our society links health insurance closely to employment, freelancers and other self-employed folks are responsible for their own insurance, and that can get pricey. However, there are options. It is possible to find health insurance when self-employed. You just may need to get a little creative.
Buying Individual Health Insurance
One way that employers get lower rates is by having a large group of people buying insurance. You can actually find group policies aimed at individuals. You are placed in a group, with other individuals seeking insurance, and premium is set based, in part, on your assigned group. I found reasonable insurance rates by shopping at HealthInsurance.org. This web site provides you with comparisons of different plans, allowing you to choose from a variety of individual and family plans with different deductibles coverages and premiums. If you own a small business, you can also go to this site, or sites similar, to find group insurance and small business insurance to fit your needs.
It is worth noting that you can take a tax deduction for health insurance premiums that you pay while self-employed, and, some of your other medical expenses might be eligible for a tax deduction. A knowledgeable tax professional can help you figure out what is deductible.
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Health Savings Account
Another option is to get a high deductible health insurance plan and pair it with a Health Savings Account. A Health Savings Account operates in a similar manner to an IRA. It is an investment, and you earn a return. Contributions to a Health Savings Account, and your earnings, come with a tax advantage up. The money can be withdrawn to pay for a variety of health-related costs, from co-pays to prescriptions to specialist visits. Your money is rolled over year to year, so there isn't a last minute rush to spend at the end of the year. Your high deductible plan will mean more out of pocket expenses, but your premium will be much lower. Many self-employed people get the high deductible plan to hedge against long-term illness and catastrophe, and then contribute to a Health Savings Account, using that money for out of pocket expenses.
Health Care Reform: State Exchanges
In a few years, you will have another option for self-employed insurance. As part of the new health care reform bill, state health insurance exchanges will be set up. Starting in 2014, small businesses and self-employed individuals (as well as others who can't get health insurance at work) will be able to go to these state run exchanges and compare health insurance plans, and choose from a range of affordable options. If you fall within the income requirements, you will receive a subsidy to help you pay for your health insurance.
With costs rising, and likely to continue to rise, it pays for you to study your options and look for a workable way to purchase health insurance. For the self-employed, a combination of individual health insurance and a health savings account seems to work well — provided you can set enough aside in your account to cover the out of pocket expenses that come with a high deductible.