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How can you get affordable family health insurance if you are self-employed?


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2014-01-24 19:12:16
2014-01-24 19:12:16
Health Insurance for the Self-EmployedWhile the health care and health insurance debate is continually changing in our nation, the reality still remains that the individual, the small business and the self employed individual are typically overlooked in the health insurance marketplace.

Some states require all insurance companies to provide some basic level of coverage to all small businesses that aren't strictly in business for the purpose of collecting insurance benefits (like North Carolina, but the coverage is very limited). Others have no requirements whatsoever.

There are certain companies in every region of the country that specialize in finding coverage for small businesses, and if you are incorporated, this will likely be your best option.

Local insurance brokers will be happy to help you, but try to find one that is experienced, and preferably a part of a larger agency that has a strong reputation.

Here is more information and advice:

  • I am a licensed health insurance agent. What you should do is find a small local broker in your area who deals with several different insurance companies, ex: Anthem, Medical Mutual, American Community, etc. Have him/her do some quotes for you and see what they have for the best price. You may also want to consider an HSA, which is a high deductible plan, starting at $1000 and you contribute, if you wish to a savings account for qualifying medical supplies, such as eye wear, contacts, band-aids over the counter drugs, peroxide. It rolls over each year and is tax free. Some plans also will pay 100% after your deductible is met and some will pay only 80%. It's your choice. When you call a broker, they can give you more information regarding these plans for your state.
  • Watch out for the so-called National Association for the Self-Employed. There have been many complaints against this arm of the MEGA Life Insurance Company.
  • I too am a licensed insurance agent. Do find a local independent agent, preferably one that specializes in health care. A good starting place is the National Association of Alternative Benefit Consultants. This organization specializes in Consumer Driven Health Plans (CDHPs) and is the organization that trains and certifies Chartered Benefit Consultants. It is the only insurance certification that specializes in CDHPs. They have a searchable database of agents by state qualified and trained in this area.
  • Go to your State Dept of Insurance and look up complaints filed against ANY insurance company you are considering. Then look up the same information for the major carriers in you state. See if the product someone is trying to sell you have an inordinately large number of complaints. Also, always get quotes from multiple carriers. Anyone who tells you that there is only one carrier with a suitable product for you generally has an interest in you not seeing what the open market can offer. Be an informed consumer.
Insurance AlternativeHave you considered an insurance alternative? Although traditional insurance can be great at times, it is an unfortunate reality that not everyone can afford the cost these days. In addition to that, there are tons of people who have limited insurance benefits or who have been denied for coverage based on a variety of different factors.

Consumer driven health care is on the rise...and one of the options therein is a discount program. Unlike traditional insurance, there are: 1. No waiting periods 2. No pre-authorization for treatment required 3. No exclusions on laboratory procedures 4. No paperwork 5. Instant savings 6. All ongoing medical problems are accepted 7. Cosmetic surgery is included in many markets 8. No age limits

There are lots of people who opt for this alternative, especially small business owners who need coverage for themselves OR for their employees.

Insurance Alternative WarningThe idea of discount programs as an alternative to medical insurance and seems to consider discounts plans part of the Consumer Directed Health Plans. Discount programs are NOT an appropriate substitute for a major medical plan. Discount plans do one thing; get you negotiated discounts for selected services. If you seldom use health care services and are willing to take the risk that nothing serious will ever happen then you may want to take the risk. I have many clients come to me after they have experienced an unexpected event and had no idea just how expensive medical procedures are today.

For some perspective, a routine appendectomy in CA runs in excess of $30,000. A gentleman who is now my client bought major medical coverage after his discount plan left him with a $26,000 bill. Contract cancer with surgery and chemotherapy and the costs can exceed $500,000. If I was in that situation, my major medical plan would cover 100% of that except my $4800 Maximum Out-of-Pocket. Even if you got a 50% discount, that is $250,000 out of your pocket with a discount plan.

Second, discount plans are not the emphasis of Consumer Driven Health Plans. If you want to learn more about them, go to the website of the National Association of Alternative Benefit Consultants. This organization accredits the ONLY insurance designation that specializes in CDHPs. The US Treasury Dept actually links directly to their site from their section on Health Savings Accounts. CDHPs are about balancing exposure, empowering consumers and transparency in pricing without surrendering the catastrophic protection a major medical provides. In fact, federal legislation around HSA plans specifically requires limits on maximum out-of-pocket expenses before the insurance company must pay everything else.

HSA's & High Deductible Health Plans (HDHPs)As a licensed health insurance agent, I speak to clients every day who are very frustrated with their health insurance options (or lack of such). The vast majority of my self-employed and small business owner clients find some relief in an HSA-eligible plan.

The basic idea is that you reduce health insurance premiums by choosing a plan that has a high deductible - for instance, $3200-$5700 for the whole family. With many plans, you can choose to have it pay 100% of covered expenses after meeting the deductible, and the entire family's medical bills go toward meeting that ONE deductible, as opposed to each family member having to meet separate deductibles. When you crunch the numbers, you often find that the out-of-pocket limits are roughly the same! By doing away with co-pays, coinsurance, etc, you can reduce the costs, often saving hundreds of dollars per month on a family plan.

The next step is being prepared to meet that deductible. In order to address this, the idea is to start putting that savings into an account called a Health Savings Account (HSA). This functions outside the health insurance plan, and is a tax advantaged account. This means that you can take an 'above-the-line' tax deduction for the money that you put into the account (up to $2850 for an individual or $5650 for a family in 2007) and you also do not have to pay taxes on any interest the account earns. You don't lose the money at the end of the year either - so if you stay healthy, it's still your money.

Seek out an experienced health insurance representative who will take time to find out how your family uses health insurance and see if this is right for you.

Now That the Affordabable Care Act is in Effect

As of January 1, 2014, the main portions of the PPACA ("Obamacare") are in effect, and these most certainly willsignificantly change the landscape for how self-employed people can get insurance.

Firstly, regarding the above answers:

(1) Talk to a qualified insurance agent/broker. The new law is rather complex, and you should certainly seek advice from someone who specializes in heath insurance policies. In fact, talk to TWO, to make sure you're getting the proper, unbiased information. The above recommendations on that are still very, very prudent.

(2) Insurance Alternatives are NOT legal anymore. At least, as primary coverage. You MUST obtain a health insurance policy that meets the law's minimum requirements, and the various Insurance Alternatives absolutely do not. They may still be useful for supplementing a lower-quality-coverage policy, but you can no longer rely on them alone.

(3) Most HDHPs are no longer offered. The changes required by the PPACA meant that the vast majority of HDHP policies cannot meet the minimum coverage requirements, so they have been discontinued. You may not buy new ones, and old ones will have been stopped as of 1 Jan 2014. Once again, check with the Insurance Agent of your choice, but it is very unlikely that any one of these plans will be an option anymore. There is some pressure on Congress to amend the PPACA to allow these types of plans again, but this is uncertain, and absolutely will no apply to 2014.

(4) HSAs are still a useful tool for the self-employed.HSAs can work very well in conjunction with policies which provide a lower level of coverage. Whether or not an HSA can be used in conjunction with a specific policy is something that you will need to discuss with your agent. As a generalization, PPACA plans which are at the Bronze and Silver levels of coverage should mostly qualify one to use an HSA. Gold-level coverage is less certain to allow for an HSA, and Platinum-level will NOT allow an HSA.

Now, some additional recommendations:

(1) Flexible Spending Accounts are still an option. The self-employed qualify for an FSA, regardless of which level of coverage they obtain from their policy. You should discuss the amount of contributions you make to an FSA, however, as, unlike a HSA, the funds in an FSA are not automatically rolled over at the end of the year. The IRS has recently changed the FSA rules, so that small amounts of money (generally, $500 or less) still sitting unused in an FSA at the end of the year can be rolled over; however, any funds in excess of this general limit are lost. Remember, though, both HSAs and FSAs are supplemental coverage; you still need to obtain primary coverage elsewhere.

(2) Visit your state's PPACA coverage portal on the Internet. The vast majority of states have a portal which contains information about how you can buy coverage, some of the rules about the PPACA, and other useful information. Absolutely visit them before going to an Agent, so you have some idea about what the PPACA, and have some questions to ask. Use your favorite search engine to find the URL.

(3) Visit your state's PPACA insurance Exchange. Roughly half the states have a self-operated web site, while the rest use the Federal Exchange. Use a Search Engine to find out your state's PPACA Insurance Exchange. This Exchange will allow you to compare and purchase a variety of different policies, grouped in general categories (Bronze, Silver, Gold, Platinum) by level of coverage. This makes them easy to compare. In addition, depending on your Adjusted Gross Income level and size of family, the majority of people in the USA will qualify for some amount of financial assistance. That is, it is expected that a slight majority of people who don't qualify for another government program will qualify to receive at least some subsidy for purchasing a policy via the Exchanges. The Exchanges will ask for your IRS AGI and family size, and possibly some other information to see if you qualify for such a subsidy. If you do, it will be shown on the pricing page for each policy. The subsidy is paid directly to the insurance company, thus reducing the immediate cost to you. Note that if your current year-end AGI is different than what you estimated, the subsidy amount may change, and you'll either have to pay more at tax time, or (if your AGI shrank) receive a tax credit. This section is by far the most complex, so SPEAK TO AN AGENT about it. Regardless of income, if you decide to not to purchase insurance through the exchange, the subsidy that the exchange shows is NOT available to you. Subsidies apply ONLY to insurance bought through the Exchange.

(4) See if you qualify for Medicaid in your state. The limits on income level to qualify for FREE Medicaid have changed recently, and depend on the state of residence. Particularly for those self-employed just starting out, where there are considerable "paper losses" the first couple of years, you may still qualify for Medicaid, even if you think your making too much. Your state's Exchange should tell you if you qualify, but you can also ask your Agent to check, or call your local Public Assistance office, and they'll direct you to the proper agency to call. Generally speaking, if you live in a state which has a state government dominated by Democrats, you'll qualify for Medicaid if your IRS Adjusted Gross Income is up to 133% of the Federal Poverty Level for your family size. In states dominated by Republican governments, you'll qualify for for Medicaid if you make up to 100% of the FPL. For specifics, look at the Exchange web sites to see which states have agreed to participate in the expansion from 100 to 133%.

(5) If you are a Veteran, contact the Veteran's Benefits Administration. You may very well qualify for coverage for your family through them. However, this is not straightforward, and you will have to discuss your options with the VA. A typical insurance Agent will NOT know the details of VA benefits.

(6) Service members and survivors, consider Tricare. If your family has an active-duty service member, or you lost a family member while in the service, or you have other direct ties to the US military, consider Tricare, the Dept of Defense's medical insurance system. Contact your local military recruitment office to find out more, and they'll direct you to the proper military agency from which to get the full details to see if you qualify for Tricare coverage.

(7) Medicare counts. If you're on Medicare, that counts as qualified insurance, and you are not required to purchase another policy.

Finally, remember several important things about being self-employed:

(a) ALL MEMBERS OF YOUR FAMILY MUST HAVE COVERAGE. You are legally required to obtain coverage, or you will be fined. The amount starts low this year, but will increase to be up to 2.5% of your AGI by 2016. Plus, it's extraordinarily financially risky not to have coverage. Be smart, obey the law, and GET COVERED.

(b) Your health premiums ARE TAX DEDUCTABLE.

(c) Contributions to HSAs and FSAs use pre-tax dollars.

(d) If you have ANY employees of your company (i.e. you run a small business, not just yourself and possibly spouse), different rules now apply. You should speak to your local Small Business Administration agency. Contact your local state government representative (e.g. County Clerk, etc.) to find out whom to talk to about advice on the PPACA's effects on Small Businesses.

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