When most of us hear the word, "insurance" our eyes glaze over and our mind starts to get fuzzy. Insurance, specifically health insurance, is complicated and confusing, and most self-employed people prefer to delay having to think about it... until it's too late.
In this article, small business owners and insurance providers across the country offer their advice on how to keep health care costs down for the self-employed. Remember, no matter which path you take, insurance costs can be tax-deductible as a business expense!
High Deductibles Increase Your Monthly Cash-Flow
Erik Lehtinen of Integrative Wealth recommends high-deductible plans to bring down the monthly cost of insurance premiums. The higher your out-of-pocket expense for any kind of claim, the lower your monthly rate will be. This is true with any health-care plan, no matter where you sign up.
To further decrease costs, if you are able to forego preventative or maternity care and just receive catastrophic insurance for emergencies, your premiums will be much lower as well.
Catastrophic Insurance (High-Deductible Health Plan -- HDHP)
Catastrophic Insurance is just that: for emergency use only. If you get the sniffles, or want a cosmetic procedure, chances are you won't be covered. However, if you get mauled by a lion at the Zoo, or otherwise encounter an accident, the insurance will cover the necessary expenses. Each company that offers catastrophic insurance has it's own guidelines, stipulations, and requirements, so be sure to read through your plan thoroughly and ask questions.
Barry Maher is a self-employed speaker that prefers his catastrophic plan. Although it has a $5200 deductible, it allows him to have a Health Savings Account for non-emergencies. This way, he can use his HSA for minor illnesses, and to pay the deductible of the HDHP in the case of a true emergency.
Health Savings Accounts (HSA)
Health Savings Accounts are available to those who enroll in a catastrophic, high-deductible health plans (HDHP). Money deposited into a HSA is not subject to federal income tax at the time of the deposit, and funds roll over year to year if they are not spent. These funds can only be spent on qualified medical expenses, but they come without federal tax liability or penalty. This also includes medications with a doctor's prescription. If you are collecting federal or state unemployment, you can use your HSA to pay your health insurance premiums.
If, at some point, you lose your HDHP insurance, you'll still have access to your HSA, but won't be able to contribute additional money to it. In the case of death, you can name a beneficiary.
Using Auto-Insurance as Catastrophic Insurance
Talk to your car insurance provider to see what kind of medical benefits they offer if you get into an accident. This option is good for people who live a healthy life, but want to be protected while out on the road. Beware: even if you get hospital coverage and loss wage coverage due to an accident, this type of insurance won't help you if you get an illness. This is purely accidental coverage.
Generally, auto insurance coverage applies to the injured, no matter who was at fault. Additionally, automobile medical insurance can pay for, partially or completely, your health care insurance premiums. Medical payments through an auto insurance plan typically over doctor visits, hospital visits, surgery, x-rays, EMT and ambulance fees, nursing services and care, prostheses as well as funeral costs.
Health Insurance Through Memberships
Those who are self-employed can seek insurance benefits through a variety of membership organizations. These organizations pool together their resources and are able to get discounts on premiums and care that individuals don't have access to.
Members CU, a Credit Union based in Traverse City Michigan, offers a variety of health, auto, and life insurance to its members. If you're currently a member of a credit union, check to see if they offer similar benefits. (It's another great reason to move your money from big banks!)
The National Association for the Self-Employed offers group health benefits for its members, as does the A.A.R.P.
The Alliance for Affordable Services represents nearly 80,000 individuals and small business owners nationwide and provides discounts on legal, health, and personal financial services.
Additionally, Mary Ratliff (Nine Hour Films) found that an artistic organization, Fractured Atlas, provided great resources and two helpful brochures that break down insurance issues and terminology specifically geared towards the freelance artist. You can view those brochures at: http://www.fracturedatlas.org/site/healthcare
Get the discount!
You may be surprised how many low-cost and free options are available to you, without getting on the government's dole. For example, many dental schools offer free or reduced-cost cleanings, exams, and procedures.
Bartering allows you to trade your businesses goods and services with other members of a bartering club. If you offer graphic or website design, you could trade that with a chiropractor or ophthalmologist for health services.
These bartering services could be run through your local chamber of commerce, or you could sign on with a national organization like The International Reciprocal Trade Association or the National Association of Trade Exchanges. Craigslist is another place you can find people to swap services with under the "Barter" heading.
Amy Rose Herrick, ChFC, was successful with this method stating, "We have used a barter network to pay for about $10,000 braces on two children. We've also bartered for general dental cleanings, crowns and fillings for another perhaps $3,000 on services used."
Also, many doctors and clinics offer discounts to patients who pay cash, instead of go through their insurance provider. You just need to ask!
"I have found that my doctors offer lower fees for self-paying patients (at least half of what they charge insurers)" discovered Becky Meyers of Magnolia-Sky "Additionally, my pharmacy signed me up for discounts through programs they have, which has saved me a bundle of money on prescriptions, two of which I take on an ongoing basis."
Finally, take advantage of the daily deal sites. Many times you'll see chiropractic adjustments, massages, dental visits, and health-club memberships at deep discounts. Health care isn't just about protecting you when you're sick, but keeping your body in optimal shape to prevent illness in the first place. Groupon, Living Social, and Amazon Local all offer daily deals on a wide variety of products and services.
Thoughts about the upcoming Health Care Changes
We've already seen some changes coming with the new health care laws. Specifically, children can now stay on their parent's insurance until the age of 25, and those with pre-existing conditions will no longer be denied coverage or care. Additionally, insurance providers are now required by law to spend at least 80% of the premiums they receive on health care. This means, if more than 20% of the premium you pay the insurance company goes to overhead, advertising, profits or other costs, you will then get a check in the mail refunding the difference, as Barry Maher has already experienced:
"The new health care law has already put money in my pocket, generating several rebates from my insurance company (because they expended too high an percentage on overhead) and it also expanded the coverage. And obviously it should make purchasing insurance easier for the self-employed, many of which currently can't even buy health insurance because of pre-existing conditions."
Unfortunately, we won't really see the full effects of the new health care laws on entrepreneurs until 2014 and beyond. We can speculate on its effectiveness, but we won't truly know until we get there. Most entrepreneurs, including Stacy Spensley, (Centerstage Wellness) are optimistic:
"My hope with the health insurance changes that are coming is that premiums will fall once more people buy in to make health care more affordable for all Americans. As a health coach, my goal is to help people need less medication and health care in general, so more people only need insurance in case of emergencies. The more we can avoid preventable disease, the better for all of us."
Need more information? Visit The National Association of Insurance Commissioners (NAIC) website: Insure U for Small Business. They provide helpful information and tips about insurance for owners of small companies and home-based businesses.
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