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Small Business Financial Article

Small Business Financial Article
Rich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, directors of training and marketing, and now as a consultant to the industry. Rich has written extensively on a broad range of personal finance topics and is published on several top financial sites. Recent books include The American Family Survival Bible and Annuity Facts Revealed: What You MUST Know Before You Invest.

Self Employed Health Insurance

Self Employed Health Insurance

As a by-product of the Great Recession that has created the highest level of chronic unemployment since the Great Depression, the ranks of the self-employed have swelled to historic levels. Many people have found new opportunities to learn, grow and become prosperous in their own right, which is a very good thing. However, among the challenges for the newly self-employed is finding the right kind of health insurance to protect them and their families against the rising cost of health care. Unexpected medical expenses are the number one reason for small businesses to go under, so health insurance is a vital piece of a self-employed business owners financial security.

Know Your COBRA Coverage

COBRA was established as a way to protect employees against a loss of health coverage while they are transitioning between jobs. Although the coverage only extends to 18 months, it provides newly self-employed individuals the time to find alternative coverage or accumulate the means to cover basic medical costs on their own.

Individual Health Insurance Policies

For now, there is still a robust market in individual health insurance policies. Unquestionably, insurance rates have been increasing over the last few years, but it is still a relatively competitive market. It’s possible to design an individual plan to meet your budget requirements while providing adequate coverage for your family. HMO plans tend to stretch your premium dollars further if you don’t mind the limitations on provider choice. Working through a broker, you can usually fashion a plan with deductibles and co-pays that make sense and keep your costs down. You can also find plans that emphasize catastrophic coverage if your budget is such that you can pay for most minor and preventative care costs.

High Deductible Plans with Health Savings Accounts

Many self-employed people have gravitated towards high deductible plans with health savings accounts (HSA). As the name implies, these plans combine a standard medical plan with a specially designed savings account to cover all of your health care needs. The medical plan has a high-deductible, in the range of $2,500 to $10,000 a year, but the premiums are very low as a result. Instead of committing your cash flow to a high premium, you can, instead, contribute it to a tax-deductible HSA. Your contributions grow tax-deferred and when used to pay eligible medical costs, they are withdrawn tax-free. Conceivably, one could use the difference in premium contribution to accumulate enough each year to cover their deductible from their HSA. Once the deductible is paid, the medical plan kicks in with standard co-pays. Unused amounts in the HSA are rolled over to be used in future years.

Health Insurance Cooperatives

Many self-employed people belong to some type of trade organization or cooperative that can provide a form of group coverage with negotiated rates. If they don’t offer their own plan, many are ready to assist their members in finding affordable individual plan. You could also look into the National Association for Self Employed which offers a plan that reimburses business owners for costs that are not reimbursed by their insurance plans.

Working with an independent insurance broker experienced in the self-employed and small business community, you should be able to identify health insurance solutions to meet your current needs.

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