Navigating Self Employed Health Insurance and Costs

As a self-employed individual, navigating health insurance can be a daunting task. You have the freedom to choose your own plan, but that also means you're responsible for understanding the costs and benefits.

The cost of health insurance for the self-employed can vary greatly, with some plans costing as low as $200 per month for a single person, while others can reach upwards of $1,000 per month for a family plan. This is because the cost of health insurance is largely determined by your age, location, and health status.

One thing to keep in mind is that you may be eligible for a tax deduction on your health insurance premiums. This can be a significant savings, especially if you're self-employed and can deduct your premiums as a business expense. For example, if you pay $500 per month for health insurance, you may be able to deduct that amount on your tax return, resulting in a savings of $6,000 per year.

Self-employed individuals can now deduct 100% of their health insurance premiums from their adjusted gross income, a change that took effect in 2003. This means they can reduce their taxable income by the amount they pay in premiums, making it easier to afford health insurance.

The Affordable Care Act (ACA) has made individual health insurance more affordable for self-employed people, thanks to premium subsidies and Medicaid expansion. Many self-employed Americans are now eligible for premium tax credits, which can significantly reduce their health insurance costs.

Prior to 2014, self-employed people had to pay the full premium for an individual policy. But thanks to the ACA's premium tax credits, many self-employed Americans are now getting help paying for their coverage. The American Rescue Plan has enhanced these credits, making them larger and more widely available.

Self-employed individuals can purchase health coverage during the annual open enrollment period, which typically runs from November 1 to January 15 in most states. There are also special enrollment periods linked to various qualifying life events, which allow a person to enroll outside of the annual open enrollment window.

The ACA's tax credits are only available on-exchange, but there are other ways that the self-employed can use the tax code to save money on healthcare. Some self-employed people may be able to deduct some of their medical expenses, including premiums.

Here are some key takeaways for self-employed individuals:

You can pay for your health insurance through your business account if you're an S Corp, using a business credit card or checking account. This way, your health insurance cost is recorded as an employee benefit expense, lowering your business's taxable income.

As a result, you'll pay less in taxes, and those tax savings could be significant, depending on your health insurance cost.

If you're a sole proprietor or LLC, you'll pay for your health insurance through your personal account, then write off your qualifying health insurance premiums on your personal taxes.

As a self-employed individual, you have several options for paying for your health insurance. You can use a business account, such as a business credit card or checking account, if you're an S Corp, to record your health insurance cost as an employee benefit expense and lower your business's taxable income.

If you're an S Corp, using a business account to pay for your health insurance can earn you a significant amount of miles and points, just like I do with my business credit card.

You can pay for your health insurance through your personal account if you're a sole proprietor or LLC, and then write off your qualifying health insurance premiums on your personal taxes. Just keep in mind that you can only write off your health insurance premiums if you and your spouse don't qualify for employer-subsidized health care.

You can also deduct your health insurance premiums if you're a sole proprietor or LLC, but the amount you deduct can't be more than your net profits.

If you choose an HSA-qualified high deductible health plan, you can open an HSA and make pre-tax contributions to pay for medical expenses. For 2024, the HSA contribution limits are $4,150 for individuals and $8,300 for families.

Contributions to an HSA can be made up until the tax-filing deadline, so don't forget to make your contributions before April 15th.

You can't claim a self-employed health insurance deduction if you have access to an employer-sponsored health insurance plan, whether it's through your employer or your spouse's employer.

If you've had employer-sponsored health insurance coverage for a few months, you'll become ineligible for the tax deduction for those specific months. The deduction is calculated on a month-to-month basis.

Having employer-sponsored health insurance can limit your eligibility for a self-employed health insurance deduction.

If you or your spouse have access to an employer-subsidized health insurance plan, you're not eligible for the self-employed health insurance deduction. This rule applies even if you choose not to enroll, as long as the coverage is offered to you.

The IRS applies this limitation on a month-to-month basis, so if you spent half the year covered by a former employer's group plan before quitting to pursue your business full-time, you're only prevented from claiming the deduction for part of the year.

You can't deduct the premiums if you opt to buy your own coverage because it's less expensive than getting coverage through your spouse's employer, even if you're self-employed and could otherwise qualify for the deduction.

For example, if your spouse has a full-time job and could add you to their employer-sponsored health insurance, you can't deduct the premiums, even if you choose not to enroll.

Here's a summary of the key points to keep in mind:

This rule can be a bit tricky, but understanding it can help you navigate the complexities of paying for health insurance as a self-employed individual.

You can deduct your self-employed health insurance premiums on your tax return, but there are specific eligibility criteria to meet. To qualify, you must not have any other health insurance policies available to you and cannot have employer-sponsored health insurance.

The self-employed health insurance deduction is a valuable tax benefit that can help reduce your taxable income. You can claim a deduction on 100% of your health insurance premiums, but only if you meet the eligibility criteria.

To calculate your deduction, you'll need to complete Schedule 1, Line 16. You can also use the self-employed health insurance deduction sheet provided in the instructions of Form 1040.

If you have more than one small business, you cannot combine their incomes to present as one. You'll need to meet a specific income limit to meet the eligibility criteria for a self-employed health insurance deduction.

You can also claim a tax credit under the Affordable Care Act (ACA) to reduce your health insurance premiums. This credit is available to households with incomes of at least 100% of the federal poverty level (FPL).

Here are some examples of medical expenses that are tax-deductible:

Remember to keep a record of your health insurance expenses, especially premiums, to help you file for a deduction at the end of each year.

Blue Cross Blue Shield is a reputable health insurance company with a huge provider network, offering affordable Gold plans for self-employed individuals and their families. Its Gold plan offers comprehensive coverage with low out-of-pocket maximums.

If you're looking for low-cost coverage, Molina Healthcare is worth considering. Its Bronze and Silver plans have some of the most affordable options on the market and still offer comprehensive coverage, with physician copays starting at $0.

For those who want a dependable option with a large provider network, Blue Cross Blue Shield is a good choice. It has a vast provider network throughout a broad coverage area, with around 1.7 million participating doctors and hospitals across the country.

Reviews of insurance providers can be crucial in making an informed decision. Blue Cross Blue Shield has a reputation for dependability, with an A rating from AM Best and an A+ from the BBB.

Customer satisfaction can vary by location, as JD Power ranks Blue Cross Blue Shield of Illinois as No. 1 for customer satisfaction, but it's ranked much lower in California. Some plans include health and wellness discounts for gym memberships and fitness equipment.

Physician copays start at $10 with Blue Cross Blue Shield. Aetna has a reputation for dependability, with an A rating from AM Best and an A+ from the BBB, but it's not the most affordable option if you don't qualify for premium tax credits through the ACA.

Molina Healthcare has a B rating from AM Best and offers low-cost plans without an employer. Its Bronze and Silver plans have some of the most affordable options on the market and still offer comprehensive coverage.

United Healthcare's network is one of the most expansive in the country, with 1.3 million healthcare providers and over 6,500 hospitals. However, it's not the cheapest health insurance for a self-employed individual, with average premium costs for a healthy 30-year-old around $400.

Here's a comparison of the customer service ratings of some insurance providers:

Keep in mind that customer service can vary by location, so it's essential to research the specific provider and plan you're interested in.

Oscar offers virtual services with a $0 copay, making it a convenient option for those who want 24/7 access to healthcare.

The company's mobile app allows members to track their deductible, talk to a physician, and refill prescriptions anytime.

Oscar's virtual urgent care is available 24/7, which is a significant advantage over other health insurance companies that may only offer virtual services during limited hours.

The app also has some interactive wellness features, like a step counter, which can be a fun way to stay motivated and healthy.

A lot of health insurance companies today offer virtual services, but most don't offer it 24/7 like Oscar does.

Oscar is currently only available in 22 states, however, all plans in those states are eligible for subsidies through the ACA.

A healthy 30-year-old might pay around $300 to $400 for a Bronze or Silver plan with Oscar (costs vary by location).

Here are some key benefits of Oscar's 24/7 urgent care:

Humana is a great option for those who want to stick with their primary care provider, but don't want higher premiums. Their flexible PPO plans offer wide coverage options.

Humana's PPO plans simplify the process of finding doctors and hospitals you trust in your new network, which can be a major hassle when switching insurance companies. With a network of thousands of physicians in every state, you'll have plenty of choices.

Physician copays with Humana start at $0, making it a relatively low-cost option. With Medicare Advantage, you can pay around $30 per month for a PPO plan.

Humana has an impressive A- rating from AM Best and an A+ from the BBB, indicating higher than average customer satisfaction ratings for a major insurance provider.

A Preferred Provider Organization (PPO) plan offers a little more flexibility than an HMO when choosing a provider.

With a PPO plan, you don't need a referral from your primary care physician to see a specialist and you can also see doctors outside your network, though you will pay a slightly higher cost.

PPO plans generally have higher premiums than HMOs and require a little more paperwork.

You may have to submit a claim yourself when you see an out-of-network doctor.

Here are some key benefits of PPO plans:

Humana is a popular choice for PPO plans, with flexible options and wide coverage.

When choosing a health insurance plan as a self-employed individual, it's essential to understand the different types of plans available. There are several options to consider, including HMO, EPO, and PPO plans.

HMO plans restrict your healthcare options to a predefined network of providers, which can be beneficial for those who want lower premiums and deductibles. However, this means you'll have to choose a primary care provider who will refer you to other specialists within the network.

EPO plans, on the other hand, offer more flexibility than HMOs, as you don't need a referral to see a specialist. However, you'll still be restricted to your provider network and will have to pay out of pocket for any out-of-network services.

Here's a quick rundown of the main differences between these plans:

PPO plans offer the most flexibility, allowing you to see any doctor or hospital you choose, but you'll pay less if you select a provider in your insurer's network. This type of plan is ideal for those who want the option to see the best doctors in their area, even if it costs a little more.

When choosing a health insurance plan, it's essential to understand the different types of coverage available. You can pick your own employer health plan, but selecting the right type of insurance can be overwhelming.

There are several types of health insurance plans, including Preferred Provider Organizations (PPOs), Health Maintenance Organizations (HMOs), Exclusive Provider Organizations (EPOs), and Point of Service (POS) plans.

A PPO plan allows you to go to any doctor or hospital you choose, but you'll pay less if you select a provider in your insurer's network.

HMO plans restrict your healthcare options to a predefined network of providers, which can limit your freedom to choose your doctor or hospital.

EPO plans work like a combination of a PPO and an HMO, allowing you to go to independent doctors and hospitals, but only from a list of in-network providers outside of emergencies.

POS plans offer a network of providers and require a referral from your primary care doctor to see a specialist.

Here are the key differences between these types of plans:

Ultimately, the type of health insurance plan you choose will depend on your individual needs and preferences.

An EPO (Exclusive Provider Organization) plan is a type of health insurance that restricts you to a specific network of providers, but you don't need a referral to see a specialist.

You'll have to pay out of pocket for any out-of-network services, unless it's an emergency.

This type of plan is a good option if you want specialist care without a referral but don't want to pay extra for a PPO.