Many people receive health care coverage from their employers. But if you are self-employed, you don’t have this option. You must purchase individual healthcare insurance, and that can be expensive.
Fortunately, there are ways to make insurance more affordable. Smart marketplace shopping strategies, health-sharing plans, and leveraging tax deductions will help lower costs. Read on to learn what you can do to get cost-efficient healthcare coverage.
Smart Marketplace Shopping
State and federal marketplaces offer a convenient way to shop for health insurance. Additionally, you can find out if you can receive subsidized government assistance that makes plans more affordable.
When shopping in the marketplace, you must create an account and submit an estimate of your income. Ensure your estimate is accurate to preview fair prices.
After submitting your application, you will receive eligibility results right away. These results will tell you if you qualify for:
- A Premium Tax Credit: Low- and moderate-income families and individuals may qualify for a premium tax credit which can offset insurance costs.
- Lower coinsurance, copayments, and deductible
- Free or low-cost coverage through Medicaid and the Children’s Health Insurance Program (CHIP)
The marketplace also offers resources so you can learn how to pick a plan. Consider your premium, out-of-pocket costs, deductions, and limits. Choose between an HMO, EPO, PPO, and POS to find a plan that gives you the freedom to choose preferred doctors and healthcare facilities.
Health Sharing Plans
Health-sharing plans are non-profit organizations that allow members to contribute money to cover health care costs. Members make monthly contributions to create a pool that can be used to cover medical expenses. These organizations are typically faith-based with members sharing a certain faith or belief.
A health-sharing plan has several characteristics that differ from traditional insurance plans. Here are some to consider.
- No Network Requirements: Unlike traditional plans that require members to see in-network doctors, health-sharing plans allow you to see any doctor you choose.
- Direct Money-Sharing: Direct money-sharing means members can give money directly to other members to help them cover their medical bills.
- Limited Coverage: Health-sharing plans can decide which medical services they will cover. Since many are faith-based, they will often choose services that align with their beliefs.
- Variable Coverage: Health-sharing plans can determine which treatments they will cover on a case-by-case basis. They will also set a limit on how much they will donate. This amount varies depending on the organization.
- Membership Requirements: Most organizations set requirements for members. In addition to aligning with religious reliefs, members may also be asked to refrain from drugs and smoking and to practice other healthy behaviors.
Leveraging Tax Deductions
Self-employed people may deduct their health insurance premiums from their taxable income and potentially lower their tax bills. The deduction is available to individuals who earn a net profit, are part of a partnership with a net profit, and shareholders who own more than 2% of an S corporation’s stock.
It is not available to individuals who participate in an employer’s health plan. If you were covered by an employer-sponsored plan for part of the year, the medical expenses paid while you were covered by that plan cannot be deducted from your taxes.
The deduction is limited. You can calculate your limitation by subtracting your employment tax deductions and any contributions you made to a retirement plan from your net profit. This calculation will help you arrive at the maximum you can deduct from your health insurance premium.
You can claim the deduction by filling out Schedule 1 on Form 1040, which is used to report additional income including health insurance deductions. Line 16 will allow you to enter your self-employed health insurance deduction. The amount will then be subtracted from your taxable income.
Self-employed individuals should plan for deductions by keeping a record of all receipts and checks relevant to medical expenses for at least three years. These documents will ensure your taxes are accurate, and they will help you in the event of an audit.
Additionally, you should estimate your net profit and potential health insurance premium deductions. Doing so will allow you to adjust your estimated taxes to account for deductions.
Save even more on your self-employed health insurance by using our services to find an affordable plan that meets your medical needs. Get a free health insurance quote today.
