Self-Employed Health Insurance Vs. Health Savings Accounts

When you are self-employed, you are responsible for your own benefits, which means you will need to find your own health insurance policy. Individual policies tend to be more expensive than group policies. However you can deduct your health insurance costs when you file your taxes, and health insurance can prevent you from filing bankruptcy because of medical bills.

Choosing an Insurance Policy

• When searching for a health insurance policy, you should contact an independent health insurance agent or look online to compare policies from several different companies. You may also be able to purchase health insurance from a professional organization you belong to. The costs of premiums and other out-of-pocket costs need to be compared to find the most affordable insurance policy for your situation. Often a high-deductible insurance policy will have a lower monthly premium and lower out-of-pocket costs, but you must meet the deductible before coverage will kick in.

Health Savings Account With High-Deductible Insurance

• A health savings account works in conjunction with a high-deductible health insurance policy. It cannot be used with a traditional health insurance policy. A health savings account allows your contributions to grow tax-free. You are allowed to contribute up to $3,050 a year for an individual and up to $6,150 a year for a family account. If you pull the money out for other expenses, you will be taxed on the money. You can open a health savings account at most banks and credit unions around the country. If you do not use all of the money, then the remainder rolls over to the next year and is still available for your use. In order for a health insurance policy to qualify as high deductible, the deductible must be at least $1,200 per person, and no other costs should be your responsibility once you have met the deductible.

Traditional Insurance Policy

• Some people are more comfortable going with an independent traditional health insurance policy. This policy will have a monthly premium and copayments for doctors visits. Although you may have a deductible, you will need to continue to pay your copayments and coinsurance costs after you have met it. Some insurance companies offer a hybrid plan that has a high deductible you need to meet before your insurance coverage begins, and then copayments and coinsurance costs. These plans do not qualify for a health savings account and may end up costing you a lot more each year than a traditional or high-deductible plan.

Taxes and Insurance Self-Employed

• When you are self-employed, you can deduct your medical expenses, including the cost of health insurance from your taxes. This extra savings may make a difference in your current tax rate if you are on the verge of moving up to the next tax bracket. Talk to your accountant to see which medical costs qualify so you can save the receipts throughout the year.