The world of health insurance is confusing for most people. About 20% of people can’t tell what an insurance premium is, and 33% of people understand their out of pocket expenses.
For those that are self-employed, that world gets a lot more confusing. It’s no wonder that out of the uninsured people in the US who are wage earners, 46% of them are self-employed.
Understanding health insurance takes more work because you’re responsible for everything – finding a policy, paying the premium, and getting the care that you need under your plan.
Read on to find out everything you need to know about health insurance for the self-employed.
Finding a Policy
When you work for someone else, you’re usually given health insurance under your employer’s group plan. You’ll pay part of the premium, which is deducted from your paycheck and your employer pays the rest.
That takes a lot of the guesswork out of your health insurance, though you still have to know what’s covered and what’s not under your plan.
When you’re self-employed, you’re completely on your own. In some cases, you may be able to get coverage under a spouse’s plan.
What do you do if you don’t work for someone else and you don’t want to get coverage under your spouse’s plan? You have to get an individual health insurance plan.
You have a few options to find a health insurance policy. You can go through a private insurer or you can go through the Healthcare Exchange.
The Exchange is a direct result of health care reform, which expanded coverage to make it easier for self-employed to get insurance using tax subsidies.
Self-Employed Insurance and Taxes
One of the advantages of self-employment is that you can write off business-related expenses on your taxes, which can lower your tax burden.
Your health insurance premiums are tax-deductible as long as you meet the requirements set out by the IRS. The first is that you had no other access to group health plans and enrolling an in an individual plan was your only option. The second is that you have a net profit in your business.
Understanding Health Insurance Terms
When you’re evaluating different medical insurance plans, it helps to know what the different terms mean. Here’s a basic guide to understanding health insurance terms.
Deductible
When you’re looking at coverage, one of the first things you’ll need to look at is the deductible. This is the amount of money you pay for health care before your health insurance policy pays for your care. For example, if you have a deductible of $5,000, you’ll pay for $5,000 of your health care costs and then insurance will pay.
In some cases, if you visit the doctor for check-ups, you would just pay the co-pay amount, and they would bill the rest to insurance. This is something that you want to verify with your doctor’s office and insurance carrier before you schedule visits.
Premium
Your premium is the amount that you pay for health insurance coverage. It’s usually billed monthly. Ideally, you’d want to have health insurance coverage that balances a low premium with a low deductible.
Co-Pay
Health care costs are usually a shared responsibility between you and your insurance provider. The co-pay, or co-insurance, is the amount or percentage of health care costs that you’re responsible for.
For example, your insurance may pay for 85% of hospital stays, and you pay 15%. Your doctor’s visit co-pay may be $20 or $30.
These are the most basic terms that you need to understand when getting self-employed health insurance. You’ll want to check out this glossary for all of the insurance-related terms you should be aware of.
Comparing Plans
Your next step in getting health insurance is to find a plan that suits your needs. Understanding health insurance terms will help you figure out what your best options are.
Coverage
Your first step is to figure out what your needs are. Are you relatively healthy, make a few doctor’s visits and would like to have a plan that includes other types of care like massage therapy?
Do you have a chronic condition like diabetes and need to make sure that your insulin will be covered?
Take a few minutes and think through how you’ll use health insurance. Think about how many doctor’s visits you’ll make, or if you need dental and vision insurance.
Now you can analyze the coverage levels of health insurance plans. You’ll want to look at what type of coverage you have, what the co-pays are, as well as the deductible and monthly premium.
Out of Pocket Costs
Your out of pocket costs can be very confusing to figure out because you need to know what your monthly premium is and your deductible is.
You may only look at your monthly premium, see that it’s low, but later on realize that your out of pocket costs are through the roof because you have a $10,000 deductible.
In most cases, if you have a very low monthly premium, you have a very high deductible. Likewise, if you have a higher premium, you’ll have a lower deductible.
You also want to make sure that you factor in co-pays into your budget, too. If you know that you have a doctor’s visit every week, you’ll need to make sure that you consider that in your total costs.
Don’t Let Health Insurance Intimidate You
There is so much misunderstanding around health insurance, it can make it easy for you to throw your hands in the air and give up. You don’t want to put yourself in a position where you’re not covered or don’t have enough coverage for health care.
In that case, you’d pay for your health insurance out of pocket, which can cause financial hardship for years to come.
The best way to avoid that scenario is by understanding health insurance options for the self-employed. There’s a lot to know and understand, which is why we’re here to help you answer any questions and make sure you get the health insurance you need.
Get a free quote for health insurance today.
