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Health Finances to be Aware of When Self-Employed

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Going into business as a self-employed individual can be a huge gamble, and it demands that you keep your health finances in check. As much as you may think of health insurance as a luxury, its primary purpose is to cushion you from any future financial problems that may result from hospitalization or unexpected illness.

Self-employment remains a dream for most citizens. It will give you the freedom to set your own rules and healthcare should be at the forefront. Health finances will enable you to have a smooth and fruitful career as an entrepreneur; however, if you ignore this fact, you may as well be headed for failure. Here are health finances you need to be aware of if you are self-employed:

COBRA (Consolidated Omnibus Budget Reconciliation Act)

This package is available for individuals who are changing into a new career or those who have recently lost their job. If your previous employer offered group health insurance coverage and you are starting your own business, then COBRA can be one of your best choices.

It lasts for 18 months, during which you are given time to search for other insurance options.

COBRA is a temporary solution to health insurance, especially if you are leaving your employer for self-employment. The employer will charge you the full cost and an extra cost for administrative purposes. This method is cheaper compared to a personal policy.

Health Savings Accounts (HSA)

These are tax-advantaged accounts used together with high-deductible insurance plans. The contributions are not taxed. Withdrawals are also not taxed as long as they are used for medical purposes. For you to be eligible for this plan, you need to have a health insurance called high-deductible plan.

Both plans were established to control the costs of healthcare because the government thought people would be more responsible if they used their own money.

HSA is basically like a personal savings accounts though the money is solely used for health care.

Individual policies

If you are self-employed, you can also go out and look for an individual health insurance policy that is offered by a private insurer.

In most cases, individual policies tend to be more expensive compared to the coverage provided by an employer. In addition, the insurer may use your health status and medical history to determine the premium or whether to provide you with coverage.

For example, if you decide to not wait and take dental insurance from a private insurer, you will be covered whenever you visit a dentist. The plan will cover – depending on the agreement - a portion or the whole cost for any preventative procedures that you undergo at the dentist.

Spousal Insurance

Another way to obtain health insurance is through one’s spouse. For example, if your spouse works for an employer who offers family coverage, it can be economical to get coverage through your spouse.

Even though your spouse will be required to pay a higher premium, it will be less compared to an individual policy.

High-Risk Pools

If you have a prior medical problem, you can approach your state and be considered for high-risk programs. You may be eligible for this coverage if you have not been insured for six months, have a pre-existing condition, and have been denied coverage.

Many states have this provision, and it acts as the last resort for self-employed individuals. However, the cost can be higher compared to a private insurer.

Conclusion

These are some of the health finances that you need to keep in mind if you are self-employed. They all hint that you need to proceed with caution or else face serious financial pitfalls. You are the one to make a choice.

Posted on November 14, 2016.

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