It can be hard getting health insurance when you are in business for yourself. So, to make things a little easier, we have compiled a list of FAQs concerning self-employed health insurance.
A Common Question:
I would like to start my own business.
Can I keep my existing healthcare plan?
You can preserve your existing coverage with COBRA. Established since 1985, COBRA is a government program that helps unemployed people avoid gaps in their health insurance.
The benefits only last for 18 months, as COBRA is meant to serve as a bridge. Once a person becomes employed, the benefits end. In addition, with COBRA, you will have to pay a larger premium.
The reason why is because you no longer have an employer to absorb these costs.
Comparing Self-Employed Health Insurance Plans
Besides COBRA, what other options do I have for self-employed health insurance?
One alternative could involve purchasing a plan that was individually underwritten. This process is really easy if you and your family have a decent health history.
You just have to find a plan that offers the best benefits for your situation. Do not cut corners in hopes of saving money. Otherwise, you might get overwhelmed with debt not covered by your policy.
In fact, the majority of bankruptcies in America occur because of unforeseen medical debt. With self-employed health insurance, you do not have to be part of this statistic.
My existing health insurance offered benefits for pre-existing conditions. Would that still be covered once I start my business?
If you pay your COBRA bills on time, you cannot be turned down for pre-existing conditions. There are a couple of exceptions however.
If you go beyond your 18-month coverage period or you decide to seek private insurance, you will get denied coverage. Note that this can occur even if you do not have any conditions.
In any case, this is one of the reasons why people decide to remain in stressful, unfulfilling jobs.
With that said, you need to think about different your alternatives before your COBRA expires.
Depending on your jurisdiction, you might be able to transfer to a new plan without any prejudice against your current situation.
How can I get self-employed health insurance if one of a member of my family has a pre-existing condition?
If you are married, and your wife or husband is on another plan, you might have an easier time finding group coverage. This is especially the case if you are purchasing plans in the private sector.
By doing things in this manner, you cannot be denied or charged more just because your spouse has a health problem. Both of you have to be accepted.
My state has “guaranteed issue” laws. Will that help my situation?
There are a few states that have “guaranteed issue” laws. As a result, health insurance providers must accept your application regardless of whether or not you have pre-existing conditions.
How this gets expressed depends on your jurisdiction, but for the most part, this is good news for consumers. The only problem is if you do not have existing coverage.
Even with guaranteed issue laws, there are some states where applicants can still get turned down if they currently do not have insurance. As such, you need to be cautious dropping any plans you have right now.
Explain how risk pools work when it comes to health insurance.
Over the years, thousands of people have been denied insurance because they suffered some type of illness. This forced them to turn to state insurance, their only option for health coverage.
Unfortunately, not all states offer the same level of coverage. Some plans were excellent, while others were subpar. Also, there is the issue of expense.
While some state plans are actually cheaper than the ones in the private sector, there are those that are more expensive. This poses a hardship on families who cannot afford those prices.
Fortunately, a law was passed that extended coverage to high-risk individuals in every jurisdiction. States started accepting applications in 2010.
If yours is among them, you will remain in the pool until 2014. At that point, you will be transitioned to a state-run program.
What about plans that are endorsed by an association?
The government has been taking a closer look at these types of plans. They are concerned that associations are distributing these plans for marketing purposes.
In addition, plans of this nature tend to have loopholes that allow associations to raise their rates without warning. They would not be able to do this if they were considered an “official” health insurance company.
Can a self-employed individual deduct the costs of their premiums?
Recent changes to the law has allowed self-employed individuals to deduct their premiums. This can be done from their federal income (though it cannot exceed how much they make).
In other words, you cannot say that your premiums resulted in a loss for your company. Even still, with this option, you are on even footing with Fortune 500 companies.
For the longest of time, they have been deducting premiums on their income. You can now do the same thing, even if your business has not brought in much money.