Buying Health Insurance for the Self-Employed

The spiraling cost of health care and health care insurance has become a major issue. How to afford insurance, the role of government in health care and how to pay for health care for the poor and disabled are all hot-button topics. One significant problem is the affordability of health insurance for the self-employed. Businesses, especially larger ones, enjoy lower group rates that are not available to self-employed individuals.

Self-Employment

• Self-employment is where you work on a contract basis for one or several employers but you are not an employee of any one. A consultant, writer or actor are typical examples of self-employed individuals.

Group Rates vs. Individual Rates

• Employers buy health care insurance for a group of people and therefore are able to get it at a group rate, which, depending on the size of the group, can be a very significant discount from the rates for the same insurance for individuals. Very large businesses can even negotiate custom plans for their business and tailor the costs to their needs.

Finding a Group

• In many cases, self-employed individuals can find a group or organization they belong to or can join that offers a group plan with better rates. This can take a little research and a little creativity, but it can be done. While you can consider traditional alternatives like the AARP or professional associations (the Screen Actors Guild or the Freelancers Union, for example), an organization called the Self-Employed Insurance Group (SEIG) offers affordable group health insurance to small-business owners and self-employed individuals.

Alternatives to Traditional Insurance

• There are alternatives to traditional comprehensive health care plans, such as major medical policies or a medical discount plan. A major medical policy has a $25,000 to $100,000 deductible that you are responsible for paying (per incident or per year, depending on the policy), and after that the insurance covers any additional medical expenses. A medical discount plan is usually organized around a single provider for all your medical services. It is wise to do careful research before committing, as these plans do have limitations and exclusions.

The Affordable Care Act of 2010

• The Patient Protection and Affordable Care Act of 2010 changed Internal Revenue Service Regulation §162(l) to permit self-employed individuals to deduct 100 percent of the amounts paid during the tax year for health insurance for themselves, a spouse, dependents and all children under age 27. Contributions to employer-based health insurance plans are not taxed, so this change puts self-employed individuals on the same footing as those who work for employers.