Health Care and the Transition to Full-Time Self-Employment
One of the most worrisome things about quitting a day-job in order to run a business full-time is insurance. The premiums for most health insurance policies are pricey, especially when purchasing one for an entire family. And while the government may be looking for ways to minimize those costs, most fledging small business owners are interested in an immediate answer to their insurance woes. Here are some things to consider when looking for insurance as you take your business full-time:
Consumer-Driven Health Care Promoted by the President
In February of 2007, President Bush’s State of the Union address proposed changes to a tax law that would promote consumer-driven health care. Among other things, the changes would also increase tax benefits for the self-employed, lowering insurance premiums and increasing health care options. Regardless of what you do now, continue to watch government-endorsed health-care options for the self-employed; you may find they produce more appealing options in the future.
Take Advantage of Your Spouse’s Health Care
This is an appealing option if your spouse enjoys a full benefits package. While the premium will go up, it will generally be less expensive than other options. If your spouse is employed full-time research his/her insurance plans to see if a good match for your family exists.
Cobra
Cobra is a federal law that enables individuals to continue under their employer’s health care insurance for 18 months after they discontinue employment. This only applies to organizations that are regulated, which generally means they have more than 20 employees. While it provides you with continued coverage it also means you are required to pay the premium and your employer’s portion along with administrative fees. But it remains an option worth considering.
HIPPA
HIPPA is another federal law you can take advantage of following your term under Cobra. HIPPA’s guaranteed insurance can assure that individuals with significant medical conditions will receive minimal coverage when converting from Cobra to an individual health plan. It can save quite a bit of money they would pay without the Cobra conversion. To qualify, you must use Cobra the full term and work with an agent familiar with HIPPA conversions. And it’s important that you ask for the conversion yourself; agents generally won’t offer information unless individuals specifically request it.
Membership Benefits
There are some organizations, like NASE (the National Association for the Self-Employed) and NSA (National Association of Accountants) that offer significant discounts on health insurance for members. While membership has its price, a little research may determine that in the end you’ll save more money overall taking this route.
Health Savings Accounts (HSA)
HSA’s are an example of consumer-driven health care. This health care plan is attractive to small business owners and their employees because it couples health insurance with a tax-deductible account with which to pay health care costs. Benefits of this plan include:
- highly-deductible health care
- a Health Savings Account which enables participants to contribute amounts equal to their deductibles
- money placed in HAS is tax deductible
- ability to roll-over HSA contributions
- penalties are not charged for participants who are over 65 and withdraw money from HSA for non-medical reason.
While there’s no perfect answer for health care insurance and small business owners, it’s important that you review all your options before picking a plan. And whatever you do, pick a plan. While insurance premiums may be staggering, potential medical costs that can result when you don’t have insurance are more staggering and could ultimately pull your business under. So take the time to research your options before taking your practice full-time.
