What You Need to Know About Health Insurance for the Self-Employed

Being self-employed does not have to equal being uninsured. Actually, it does not even have to equal insanely expensive health care, either. When the health reform bill goes into full effect in 2014, you’ll be able to buy insurance, with guaranteed issue, at very reasonable rates through Health Benefits Exchanges.

But for now, we’ve got your best options for coverage and how to handle your medical expenses when it comes to taxes. If you’ve already tried or exhausted the usual suspects—COBRA or a spouse’s plan, try these sources:

Find a Professional Association

Many trade or professional organizations offer their members insurance at a group rate. Look into what organizations for your profession offer, or visit:

• National Association for the Self Employed (www.nase.org),
• Freelancer’s Union (http://www.freelancersunion.org/) for people in New York
• Fractured Atlas (http://www.fracturedatlas.org/) for artists and performers

Before you choose a plan, make sure it meets your individual needs. It’s often easy to choose a plan based on the premium alone, but this can be dangerous. There are at least three top things you should check out and understand before buying:

Deductible: This is how much you’ll have to pay out-of-pocket before the plan starts to cover your costs. So the lower the deductible, the better. There are a lot of high-deductible plans that look attractive because they have a low premium. This is not necessarily a bad thing, just know what your plan covers and be prepared with savings to cover your deductible if you need to.

Exclusions: This is all that fine print stuff. For example, prior authorizations, limitations on coverage, and exceptions to the rules. Let’s face it: most people aren’t going to read it all.  But you should at least understand the summary of benefits to make sure there aren’t huge holes in your coverage.

Network providers: This is important if you choose a PPO or HMO and you have specific doctors or hospitals where you get care. Make sure to check with both the plan and providers to see if they’re covered. 

If you’re really unsure, listen to what other people in the association have to say—group insight can be the most valuable!

Pre-Existing Conditions Insurance Plan (PCIP)

Every state operates a plan specifically for people with pre-existing conditions who have been denied coverage from an insurer. To qualify, you have to have been without coverage for the last six months and have some kind of proof of denial. The rates for PCIP are generally more affordable than the individual market. Get more info or apply online [www.pcip.gov].

Become a Group

Employer groups can purchase insurance without being denied the same way an individual can. And guess what? It only takes two to be a group. So if you are working alone, and hire one employee, you can purchase a group plan. Your rates can still be very high, but you will at least have access to coverage. Visit your state’s Department of Insurance or the National Association of Insurance Commissioners [naic.org] for help setting up a group plan.

And for the taxes…

If you’re self-employed, you can deduct the cost of health insurance for yourself, your spouse, and your dependents. You do not even have to itemize your expenses—the self-employed deduction is completely separate (although, you certainly can and should if your expenses are high). Keep in mind that the health plan must be under your name or your business’ name (not a spouse), and you must have made a net income that year. If you had a loss, you can’t take the deduction.