Self-employment is an important career choice for many people. But with this choice comes the need to provide your own health insurance, which can be a formidable expense. The new health care legislation signed into law by President Obama should make it easier for individuals to purchase health insurance. Until all its provisions take effect, if you are self employed and are seeking health care coverage, here are four options.
1. Join your spouse’s plan. If you have a spouse or partner who is or can be enrolled in an employer-sponsored plan, joining his or her plan is usually the simplest and least expensive way to maintain coverage. Nearly all employer-based plans offer coverage to spouses and children, and many provide coverage to domestic partners as well.
2. Look into COBRA coverage. If you formerly worked for an organization that employed 20 or more people and made a group health plan available to employees, you may be able to obtain medical coverage through the federal Consolidated Omnibus Budget Reconciliation Act, known as COBRA. COBRA requires employers to make available to departing employees the option of continuing membership in an employer-sponsored group medical plan at the employee’s expense. You can continue your health insurance under COBRA for yourself and your dependents for 18 months, during which time you can search for the best option as a self-employed person.
3. Check out high-deductible plans. Another option is to enroll in a high-deductible health plan (HDHP) and fund a health savings account (HSA). As the name suggests, high-deductible health plans involve a high deductible or threshold, a minimum of $1,200 for an individual and $2,400 for a family in 2011, below which you must pay all costs. In essence, a high-deductible policy provides coverage for catastrophic situations but not for regular doctor visits and routine care. Such plans can involve complex cost-sharing arrangements in which certain procedures or visits are covered only in part. When considering this option, factor in not only monthly premiums but also the costs of partial out-of-pocket payment for different procedures. Combining an HDHP with a tax-free health savings account can also save you in taxes. You deposit pre-tax dollars into your HSA, and use that money to pay medical expenses that aren’t reimbursed by your health insurance.
4. Investigate coverage through a professional association. A more cost-efficient option may be to enroll in a group plan through a professional association or union. Check with any affiliations you may have (or inquire about any you can join) and ask about group rates for members.
When shopping for the right plan, make sure to compare premiums, coverage, deductibles, and copays. Also keep in mind that after you turn 65, you may be eligible for Medicare, even if you remain self-employed.
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