Health Insurance for Self-Employed
California is the nation's leader in self-employment. In fact, two of its cities -- Berkeley and Santa Monica -- each report approximately 22 percent of households generating income from self-employment. Entrepreneurship certainly has its rewards, but working for one's self means acquiring individual health insurance rather than enrolling in a group plan through an employer. If you are self-employed in California, health insurance does not have to be out of reach.
Income Tax Breaks
Individual health insurance plans often come with higher premiums than employer plans, because group plans spread the risk between multiple participants. However, that does not mean that self-employed Californians are relegated to sub-par insurance coverage. There are current and future tax breaks that make purchasing individual health coverage more affordable.
The U.S. tax code extends some tax relief to self-employed individuals who are paying for their own health insurance premiums. According to the Internal Revenue Service, you can deduct the amount you pay for medical, dental and long-term care insurance premiums as a business expense on your federal tax return. In order to take the deduction, you must have reported a net profit from your business. Also, you cannot take the deduction for any month that you were eligible to enroll in an employer's group health insurance plan -- including that of a spouse's.
In the future, additional tax relief will become available to self-employed Californians who purchase their own health insurance. Many of the Affordable Care Act's benefits begin in 2014, when tax credits will become available to certain taxpayers who are not eligible for health insurance coverage through an employer. So long as your income is between 100 and 400 percent of the federal poverty level for your household size, you could be eligible for an annual tax credit to help subsidize your premiums.
Finding Health Insurance Self-Employed
California's leading health insurers all offer individual health plans on the private market. You can purchase a plan that covers you and your family, and you can feel confident shopping for rates because in California, premiums are fixed for all policies. Individual and family plans are available through companies like Blue Cross, Blue Shield, Kaiser, Aetna and Health Net, and there is a wide range of policies that will fit any coverage need or budget.
Some of the most popular plans among self-employed individuals in California are high-deductible health plans that provide lower monthly premiums in exchange for a higher plan deductible. Not only do these plans require less money up front, but they are also compatible with health savings accounts, which allow you to take advantage of tax-free contributions so long as the money is distributed for qualified health expenses alone. In other words, you could use the savings from your monthly premiums to make contributions to your health savings account. You'll have a lower tax bill and also build a savings to help pay for future deductibles.
If you prefer more comprehensive health coverage with lower out-of-pocket costs, a PPO or HMO plan may be right for you. Several insurers provide self-employed policy-holders with access to doctors, hospitals and other medical services with low co-pays, minimal coinsurance and affordable plan year deductibles. These benefits usually require higher premiums, but given the nature of self-employment, many prefer the security of knowing they will not face exorbitant medical costs unexpectedly. Some insurers even offer combination PPO plans, such as the LumenosÂ® HSA Plus from Anthem Blue Cross, that are eligible for use with a health savings account.
Keep in mind that as a self-employed worker, you should avoid the temptation to purchase a temporary health plan unless you plan to gain future access to group coverage through an employer. Although temporary plans are available and often more affordable that long-term coverage, they have more coverage limitations and also expire at the end of a preset term -- usually about six months. If you or a spouse covered on your insurance policy develops a health condition while coverage is effective, you may not be approved for new coverage based on the presence of a pre-existing condition.
If you are self-employed and in search of affordable health insurance coverage for you and your family, let CaliforniaHealthPlans.com be your one stop shop for health insurance quotes. No one offers better premiums in California than we do, and you can shop and compare rates from the state's leading providers all from a single website. To get started, request your free quotes today.