Health Insurance For Self-Employed

October 19, 2012 by  

Health Insurance For Self-Employed, If you work for yourself, finding health insurance is a big headache. While there’s no holy grail, there are ways to navigate the maze and find good coverage at manageable prices. Whether it is affordable, of course, is a crapshoot. That depends on a myriad of factors-where you live, the ages and the health of who is being covered, and the type of policy you need, among other things.

Today, an estimated 42 million people – about a third of the American work force- are technically their own boss. I’m one of them. We’re self-employed freelancers and independent contractors. Some workers who fall into this cadre are temps or part-timers. Some have already officially “retired” and are continuing to work a reduced schedule, or have accepted an early retirement package, then launched an entrepreneurial enterprise.

Regardless of the job title, the problem is the same: Finding health insurance. More American adults lacked health insurance coverage last year than in any year since Gallup and Healthways started tracking it in 2008. The uninsured rate has been increasing since 2008, climbing to 17.1% in 2011.

For loads of people I’ve interviewed and met over the past several years, it’s a roadblock. They gamely talk the talk of following their passion and finding their dream job, or starting their own business, but the thought of losing health benefits stops them cold. It’s a huge hurdle when you consider that starting over in new field will generally require a pay cut, at least initially.

When clients come in for financial planning advice before they make a leap to self-employment, they’re shell-shocked to discover their new health insurance premiums might clock in at $600 or more a month, says Greg Bitz, a fee-only certified financial planner with Metropolitan Financial Group in Chevy Chase, MD. “For some, that’s quadruple what they had been shelling out via their employer-sponsored plan.” That can require serious budget revamping, and Bitz usually reviews their possible policies before they sign on for coverage to be sure they know what they’re getting. (For more career changing tips, go to How to Plan for A Second Career.)

For countless self-employed workers, though, health insurance is simply not within their means. Help is on the way. The Affordable Care Act, now the the 2010 health-care reform law, is intended to tackle this problem beginning in 2014. That’s when if you’re under 65, you will be able to purchase health insurance through state insurance exchanges, with tax credits for those with low and moderate incomes. And if you have a pre-existing condition, you’ll be able to land a policy. For more details on what the health-care law does, go here.

For now, here’s one piece of good news. If you’re self-employed and pay health insurance premiums, you can deduct 100% of the cost from your income when calculating your federal income taxes. The deduction is not subject to the 7.5% AGI limitation that other medical expenses are.

Here are eight ways to land self-employed health insurance in 2012:

Ex-employer’s plan. If you’re retiring, count your lucky stars if this is an option. Most workers don’t have it. One of the biggest hurdles is figuring out how to pay for health insurance until 65 – the magical age when Medicare kicks in. Medicare will cover the majority, but not all, health care costs. Among large firms (200 or more workers) about one in four offered retiree health benefits in 2011, down significantly from 32% in 2007, and a far cry from the whopping 66% who offered retirees health bennies in 1988, according to the Kaiser Family Foundation/Health Research & Educational Trust survey. And only 6 percent of small firms offered retiree health benefits last year.

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