Self-Employed Health Insurance
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.
Small Businesses and Health Insurance
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:
- Of the 4.5 million self-employed individuals approximately 31% were uninsured, 28% purchased healthcare insurance directly, and the remainder had coverage from some other source (such as a spouse's plan).
- Nearly two-thirds of those who purchased health insurance directly from an insurance company subscribed to a fee-for-service / indemnity plan.
- Only 39% of those self-employed individuals that had health insurance from another source had an indemnity plan.
Cost of Self-employed Health Insurance
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.
Health Insurance Plans
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.
Fee-for-Service / Indemnity Healthcare Plans
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.
Health Maintenance Organization
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.
Health Insurance Rate Comparisons
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 2017).
Average Monthly Health Insurance Premiums
Deducting Self-employed Health Insurance Costs
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:
- If they have a loss on IRA Schedule C, they can't take the health insurance deduction. That means the company needs to be profitable.
- They're also not allowed to include copayments, coinsurance, or insurance deductibles in this tax deduction.
Comparing Health Care Insurance Costs
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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