Health Insurance For Self-Employed

[Guest Kevin 2]

Hey guys,

I would like to know have any of you found REASONABLE priced health insurance that DIDN'T jack the rates up 35% to 50% at your yearly renewal date? I'm lucky and still have age on my side (I'M 30) so premiunms are still not too bad however, when it comes up for renemwal I get hit with the 35-50% YEARLY rate hikes! OUCH! Which of course sends me shopping for better Insurance and rates ;-)

I'm aware that most companies have yearly increases that run around the 10% mark but not 50% like I have ran into. I would like to find a company that I can actually afford to stick with for more than a year at a time..LOL

Any advice or experience with these companies that CLAIM they have cheap insurance for the self-employed? I don't want to get ripped off with some unheard of company just to save money. That won't pay the bills if the time comes that I need them. Thanks in advance for any advice or suggestions you guys may have.

 

PS..Been a long time since I stopped by and posted ;-)

[Guest bighugbearphx]

>You can definitely benefit from a "Medical Savings Account" ...

> There are a number of technical requirements for

>the MSA, so look it up and dont rely on my outline above.

 

Good advice. Since I'm a tax accountant, let me point out that the limits mentioned have increased (For an MSA established in 2002, your health insurance **must** be a policy with a deductible no less than $1,650 and no more than $2,500. If you have more than one policy or lower deductibles, you can't have an MSA.) And the amount you can contribute, as a "self-employed" person, is the lower of your earned income (what you report on your return) or 65% of your deductible. Also, FYI, the ability to open an MSA (also called an "Archer MSA") was supposed to end after this year, but has been extended to 12/31/2003 (That doesn't mean they go away, just you can't add any after that date. In reality, Congress will likely keep extending that and eventually make it permanent.)

 

Other suggestions:

1. Realize that not all insurance companies cover people in all states, and some that may be "cheap" in state A will be expensive in state B.

2. If you belong to any kind of social, purchasing or networking group (could be something as simple as having a Costco membership) check to see if they offer "group" medical insurance to its members. But don't assume they will be the cheapest around, and keep shopping around.

3. In considering any alternatives, remember that being self-employed lets you DEDUCT your medical insurance (actually, 70% of it for 2002, but goes to 100% starting in 2003) even if you DON'T itemize deductions on Schedule A. That means the real cost to you is the premium you pay less the tax benefit you get from deducting it. For example, if you pay $250 a month in premiums, and are in a 28% bracket on federal, it really "costs" you just $180, since the deduction reduces your tax bill by the other $70. If your state follows federal rules, the savings can be even more.

[Guest Merlin]

You can definitely benefit from a "Medical Savings Account", which is primarily available to the self employed. You set up a bank savings account and deposit as much as $975 a year---it continues to be your own money (for future medical expenses). You deduct the amount on your tax return. It is NOT subject to the percentage limitations of other medical deductions. Then you buy medical insurance with a high deductable-like $1500 a year. This lowers your premium. You wil have to pay ordinary, small medical expenses from your own funds or from the medical saving account, but at your age, if you are in good health, you will build up a nice account. There are a number of technical requirements for the MSA, so look it up and dont rely on my outline above.

There is a downside to all attempts find a better and cheaper medical insurance. If you ever develop a serious long-term disease, you will be locked into your insurance at the time. If it has a high deductable or low total benefits, it may not be adequate but a new company will not cover your existing disease. Similarly, a new policy may not cover it if the company can show that you knew or should have known that it pre-existed the policy. You cannot wait until your house is on fire to by a fire policy, and if a woman finds a lump in her breast, it may be too late to buy a medical policy.

[guyinsf]

If you are mainly interested in catastrophic illness coverage, you might want to see if there is a public group in your area/state which you can join in order to gain access to their insurance coverage. There is a group in California I looked into years ago when I was self-employed (I think they were called Media Alliance or something like that). The only qualification to join the group was that you worked in or had an interest in mass media (radio, tv, newsprint, etc). That describes most people, I think. At any rate, their group rate was affordable, and the annual fee for being part of the group was low. When I heard about it from someone, it definitely sounded like the primary reason for its existence was to allow uninsured individuals to get in on a group health plan.

 

Ps. Sigh. I just searched for this group and found them at http://www.media-alliance.org. They have now instituted various levels of membership, and unless you actually work in media you cannot participate in their health/dental insurance plans. Still, you may be able to find such an organization where you live that does offer access to a group health plan.