Health Insurance for Self-Employed Individuals : Options, Advantages, and Considerations

1. Introduction

   There is a difference when it comes to obtaining health insurance when a person is self-employed viz-a-viz when a person is an employee of a company. While an employee of a company gets access to employer sponsored health insurance for a self-employed person getting a health insurance is not easy task.^[1]

   These individuals need to go through a daunting process to get the insurance coverage that fits their needs and requirements. With the ever-rising cost of healthcare and the constantly changing healthcare policy over the years it is extremely essential for every self-employed individual to have a knowledge about health insurance coverage that is best suited to them.^[1]

   1.1 Purpose of This Article

   The aim of this article is to explore the various options that are available for self-employed individuals with regard to healthcare insurance including individuals plans from the marketplace, plans available through organizations, and health saving accounts.^{[1, 2]}

   The article also highlights the merits and demerits of each of the option mentioned above and provides tips on how to choose the best insurance plan that will not only cater to all their needs but also be easy on the pocket.^[1]

   Additionally, the article highlights the tax benefits that a self-employed person gets when choosing a health insurance plan of which he or she should be aware of.^[1]

2. Options for Health Insurance for Self-Employed Individuals

   2.1 Individual Plans, Group Plans, and Health Savings Accounts

   Individual Plans: A self-employed individual can go for an individualized healthcare plan directly from the marketplace. However, the coverage these plans provide may be limited and the person may have to shell out more money in terms of premiums to these insurance companies.^[2]

   Group Plans: There are a whole lot of professional organizations and associations which offer group health insurance plan. A self-employed person can go to these organizations and associations and opt for a group plan which will have much lesser premiums and provide a more comprehensive coverage.^[2]

   Health Savings Accounts: Another option for self-employed individuals is the health savings account. This is a medical savings account which provides tax benefits and allows people with high deductible health plans to access medical coverage.^[2]

   2.2 Advantages and Disadvantages of Individual Plans, Group Plans, and Health Savings Accounts for Self-Employed Individuals

   Individual Plans: The primary advantage of an individual plan is that the person can set the premium and the extent of coverage that they require according to their needs and expenses. However, the premiums that these plans have are significantly high for the level of coverage that they provide.^[3]

   Group Plans: The primary advantage of this plan is that it provides a much wider coverage to people at a much lower cost. However, the only demerit of this plan is that self-employed individuals do not have much options with regard to group plans and even if they get one the coverage may be limited.^[3]

   Health Savings Accounts: Tax benefits is the primary advantage of a health savings account advantage. However, to get this plan a self-employed individual will have to show that he or she has high deductibles in their existing health insurance to get the benefit of health savings account.^[3]

3. Considerations When Choosing a Health Insurance Plan For Self-Employed Individuals

   3.1 Coverage and Cost Factors

   There are three primary factors that need to be considered before choosing a health insurance plan for a self-employed person. These are co-pays, deductibles, and premiums as all these three are out-of-pocket expenses.^[4]

   A deductible is a fixed amount that a person has to pay the insurance company before the insurance coverage starts to cover the medical expenses. A Co-pay is the amount that a person has to pay for each doctor’s visit. A premium is the amount that the person has to pay the insurance company as a yearly cost of the plan.^[4]

   3.2 Personal Healthcare Needs

   When going in for a healthcare plan the personal needs and preferences also need to be taken into account. This generally includes visits to the physician, medication expenses, and any necessary or elective procedures that the person may have to undergo in the unforeseeable future.^[4]

   A plan with a low premium may result in high out of pocket expense at the time of the doctor’s visit or at the time of the procedure and this should be kept in mind before choosing a healthcare plan.^[4]

4. Tax Considerations for Self-Employed Individuals

   4.1 Tax Deductions

   A self-employed individual can show the health insurance premium as a business expense when they file their tax returns. This plays a big role as it significantly reduces the taxable income of the person resulting in lower tax liability.^[5]

   4.2 Eligibility and Calculation

   The eligibility criteria for insurance premium deduction includes that the person must be self-employed and should not be a part of a group coverage plan. Additionally, the person should have a net profit on the tax return. The deduction is limited to the lesser of the actual premium paid or the net profit made by the individual through his or her business.^[5]

5. How to Apply for Health Insurance as a Self-Employed Individual

   5.1 Enrolling in a Plan

   A self-employed individual can enroll in an individualized healthcare plan directly through a marketplace, or approach a professional organization or association that provides group insurance or open a health savings account.^[1]

6. Conclusion

   The criteria for having health insurance for an employed person and a self-employed individual is different. While an employee of a company gets health insurance coverage as an employer sponsored insurance plan but for self-employed people, they have to go through a daunting process to get healthcare insurance.^[1]

   However, there are options available for the self-employed individuals and each one of them have been explained in great detail above along with their merits and demerits. It is essential to explore all the options that are available and choose the option that best fits the needs and preference as there should be no compromise when it comes to getting best health care when it is needed the most.^[1]

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