Self Employed Health Insurance Costs

Self-employed individuals often purchase individual health insurance plans. Individual health plans provide several types of coverage for you and your family. Individual plan costs can vary widely based on several factors. Premiums depend on the amount of out-of-pocket costs such as the amount of deductible and co-insurance that you are willing to accept. Unlike group insurance, individual insurance is subject to underwriting, which means the insurer will determine your risk level and base plan rates on this rating. With group insurance, employers often share the cost of the premium with employees, but self-employed individuals are responsible for the entire premium.

Premiums

• Self-employed individuals often pay higher premiums than employer-based group plans because they don't have the advantage of a group discount. The premium is the actual cost to have the insurance policy coverage. Most premiums are billed and paid monthly, although there are a few exceptions, such as a temporary health plan, that you can pre-pay. The premium varies based on plan type, amount of coverage and benefit and the deductible amount. Other factors such as your age and health may also affect the premium rates. You must pay the premiums to continue coverage. If you do not, your policy will lapse.

Deductibles

• Many health plans include a deductible. The deductible is a dollar amount that must be paid by the policyholder before the insurance company begins paying for services. Deductible amounts vary from a few hundred dollars to several thousands of dollars. As a self-employed person, you may wish to have a higher deductible because the higher the deductible, the lower the premium. Deductibles are usually features of Preferred Provider Organizations and not Health Maintenance Organizations. Health care services, such as preventive care visits, may be excluded from the plan's deductible.

Coinsurance

• Coinsurance is a shared expense between the insured and the insurer. This split is represented as a percentage such as 90/10 or 80/20. The insurance company usually pays more of the cost of services, but you must pay your percentage. For example, if your coinsurance is 90/10 and you visit a doctor, your insurance company requires you pay 10% of the doctor's bill. To shift costs away from health insurance, if you are healthy and self-employed, consider plans in which the insurer's coinsurance is smaller. This results in lower premiums, leaving you with extra dollars to invest in your business.

Co-payments

• Co-payments are fixed dollar amounts paid by the policyholder, usually at the time of service. HMOs typically feature co-pays, but other plans may also require co-pays, as well. Co-pay dollar amounts for doctors' visits may be as low as $5, $10 or $25 and higher for outpatient procedures. Co-pays often do not apply for inpatient hospital admissions but do apply to prescription drug plans.