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Health Insurance for the Self Employed

Health insurance options for the self-employed
People who work for themselves run the gamut of trades, ages and incomes. Consequently, there's no one-size-fits-all approach to health insurance for self-employed Americans. You need to evaluate both your current situation and your future before you choose a health plan. Here are four common situations:

1-You’re a one-man (or one-woman!) show, and don't foresee your employee roster growing in the near future. In this case, your best bet is probably a standard individual or family policy. You can choose from both indemnity and/or managed-care plans.

2- You're working on your own, but see that changing in the near future (whether you'll be hiring more help or expect to be hired by a larger organization yourself). In this case, a temporary policy might be a better option. These plans are fairly inexpensive and you won't have to make much of a commitment. (This option is strictly short-term, however; don't substitute it for permanent coverage.)

3- You employ between 2 and 50 people. Health insurance for the self-employed plus a few employees is a more complicated matter. Chances are you qualify for (and would greatly benefit from) a group health insurance plan.

4- You fall somewhere in between (a business run by you and your spouse, for example). These special situations have to be evaluated on a case-by case basis. Keep reading for more information on how to choose a policy in these situations.

Self employed health insurance costs and benefits
Health care coverage isn't cheap. And unfortunately, that can be especially true in the case of insurance plans for the self-employed. Insurance is least expensive when rates and care are pooled among a large group of people. The larger the group, the more evenly the risk is spread, and the lower the individual premiums.

Health insurance for the self-employed doesn't fall into this category. Unfortunately, you can expect the coverage to cost more, especially if your business consists of just you or you plus a couple of others.

Happily, the situation is improving. As of 2002, self employed health insurance costs are now tax deductible, at a rate of up to 70%. And that percentage could rise.

Another recent improvement is the growing number of health care options. Insurers are starting to offer plans that combine elements of fee-for-service plans, together with managed policies, so that you (and your employees) won't have to choose between good cost and good care.

If you are self employed (including general partners in partnerships, limited partners receiving guaranteed payments, and taxpayers who receive wages from S-corporations in which they own more than 2% of the common stock) and have a net profit for the tax year, you can deduct 100% of the self employed health insurance premiums you paid in 2005 for yourself, your spouse, and your dependents. Your self employed health insurance tax deductions cannot exceed the net profit from the business from which the self employed health insurance premiums are paid. You cannot take the special 100% tax deduction for self employed health insurance premiums in any month in which you are eligible to participate in any subsidized health plan maintained by your employer or your spouse's employer.