If anyone ever says it's easier to run your own company, they're forgetting about the benefits an employer provides for their employees, including health insurance. Think it's easy for the self-employed to find inexpensive health insurance? Think again.
Finding the right health insurance for self-employed individuals is more than just finding cheap insurance. It's all about finding the health care coverage that fits someone's lifestyle, and it shouldn't cost a fortune.
It's not surprising to learn that most small business employees, and their families, either do not have any health insurance or have inadequate coverage. The problem is even larger for those persons that are self-employed with no employees.
Although somewhat dated, a 1993 survey the National Center for Health Statistics conducted among self-employed individuals with no employees revealed the following:
The above mentioned survey also found a high correlation between the income level of a self-employed person, and their likelihood of purchasing health insurance. The more money the individual made, the greater the chance of carrying insurance. That makes sense because the cost of self-employed health insurance is significant.
What can a self-employed person expect to pay each month for health insurance? The answer depends on the type of plan selected. Generally, there are two categories of health insurance, with a large number of plan types in between.
An indemnity, comprehensive, or fee-for-service plan does not use a health care provider network. The individual is free to choose any medical doctor or hospital they wish. Coverage is usually limited to customary and reasonable charges, and the patient is responsible for charges above these amounts. Indemnity plans frequently have a coinsurance provision as well as a deductible.
At the other end of the insurance spectrum is the health maintenance organization, or HMO. This type of coverage usually requires participants to choose their primary care physician from a list of doctors, and go to hospitals that participate in a network. Referrals to specialists are necessary, and a nominal copayment usually applies.
There are many plans that fall in-between these two categories. Anyone that would like more information on this topic should take a look at our article on Family Health Insurance. That article contains more detailed descriptions, as well as some questions and answers that might help the self-employed to figure out which type of health insurance is right for their lifestyle.
Rates charged for health insurance will vary based on gender, claims experience, health status, age, and other factors. Typically, premiums will be quoted for self-employed individuals and those wishing to purchase coverage for their families. To give an idea of what the premiums might be like, here is some information gathered from the federal government's eHealth program (as of September 2014).
The good news is that if an individual is self-employed, and paying their own health-insurance premiums, they can now deduct up to 100% of these expenses from their federal income tax return. The tax deduction is taken from total income, and it's possible to claim this deduction even if they don't itemize deductions on their tax return.
That means self-employed taxpayers can deduct up to 100% of the health insurance expenses they paid for themselves, a spouse, and dependents. Generally, there are two factors that might exclude someone from taking this deduction:
Anyone that's self-employed, and looking for help in choosing between health care insurance plans, then we have an online insurance calculator that allows users to evaluate each offering. Our health care costs calculator uses historical medical care expenses, along with the monthly premiums, coinsurance, deductibles, and copayments of each plan to calculate the total out of pocket costs for each policy type.
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