Considering Small Business or Self-Employed Health Insurance

Do you own a small business, or are you a freelancer or independent contractor that works for yourself? There are many personal and financial benefits to self-employment and small business management, but one tricky area for you may be the whole domain of health insurance. If you were previously employed, you probably enjoyed the benefits of health insurance through your work, where a percentage was paid by you and the rest through your work. However, now that you’re “on your own,” so to speak, finding, attaining, and paying for health insurance becomes a whole different ball game.

A significant number of small business owners and self-employed individuals either operate with a reduced amount of health insurance coverage, or with no insurance whatsoever, mostly for reasons of ignorance or rising rates. In fact, according to a Kaiser Family Foundation study, nearly 25 million self-employed Americans (and their families) are without health insurance.

You may not think you need any health insurance coverage now that you’re self-employed or managing your own business. However, statistics say that small business owners, freelancers, and contractors without health insurance are at high (in fact, double) risk for the financial implications of both sickness and injury should they occur. First, they have to bear the full costs for care and treatment related to their injury or sickness, and second, their injury or sickness could negatively impact their business if they’re out of commission for a period of time. You will certainly want to avoid these unfortunate situations.

This is where health insurance comes in, and it’s definitely something to consider if you’re self-employed in any fashion. You have a number of options where health insurance is concerned. Buying individual health insurance is one, although you’ll soon find that this option can be quite expensive. But if this is the route you may want to take, do some research and comparison shopping with different health insurance plans and policies. Acquiring an MSA (Archer Medical Savings Account) is another option, as is choosing COBRA (Consolidated Omnibus Budget Reconciliation Act), a federal law requiring employers to allow their employees who are leaving to purchase health insurance through their group plan. However, MSA and COBRA can also get quite pricey, particularly the latter if you are used to your employer covering a large portion of the health insurance expense.

You could also look into acquiring a health insurance plan through some type of professional organization or association, or find health insurance specifically geared toward the self-employed and small business owners through government-based, partially-funded (subsidized) programs.

Something else to keep in mind with respect to health insurance for the self-employed is that you’ll likely be able to take advantage of some tax breaks and deductions. In the past, if you kept track of (itemized) your expenses for tax purposes, you could usually claim the difference between what you spent on medical-related expenses that were not reimbursed and 7.5 percent of your adjusted gross income in a year.

However, since 2003, all self-employed individuals are able to claim all their medical expenses as business expenses, regardless of their adjusted gross income, and often even if you don’t itemize your deductions on your tax return.

It’s recommended to sit down with a qualified health insurance agent who specializes in self-employment cases to discuss your options and eligibility.