|
|
| Solo Health Care |
THE
DECISION TO work for yourself or someone else often boils down to
one issue: health care.
While
employees generally pick up the tab for only a small portion of their own
health insurance, most business owners get stuck with the entire bill. And
that's no small change. In 2007, for example, the average annual premium for an
employer-sponsored plan amounted to $12,106 for families and $4,479 for
individuals, according to the most recent employer benefits survey from Kaiser
Family Foundation in Menlo Park, Calif.
To
limit their costs, entrepreneurs (if they're lucky) latch on to their spouse or
partner's employer-sponsored health insurance. Others make their premiums more
manageable by opting for plans with high deductibles, which typically only
cover catastrophic illnesses. Still others — particularly start-up
entrepreneurs — simply forgo coverage entirely and plow everything back into
the business, a risky strategy that could backfire if they become ill or
injured.
These
daunting circumstances discourage many would-be business owners from taking the
plunge. However, depending on what state you live in and which type of plan you
select, getting health care on your own may not be such a stretch after all.
Here
are some solo health-care options:
Coverage
Through Cobra
For start-up entrepreneurs
unsure about whether or not their business will succeed, it may make sense to
extend your coverage via the federal Consolidated Omnibus Budget Reconciliation
Act, or Cobra, says Matt Tassey, an independent insurance broker in Portland,
Maine. Through Cobra, previously insured employees may extend their coverage
for up to 18 months after leaving a job. While the price for Cobra coverage
(including a 2% administrative fee) usually rings in at around $400 a month for
individuals and $1,000 a month for families, it may be particularly attractive
for people with existing medical conditions, as they can be denied coverage in
most states, Tassey says. (See related sidebar for more information). For state-by-state
coverage offerings visit Georgetown University’s healthinsuranceinfo.net.
"Group Of One"
Plans
If a Cobra policy or a
similar state-administered offering isn't an option, sole proprietors in states
including Delaware, Maine and New Hampshire can form "group of one"
plans, says Gary Claxton, vice president of the Kaiser Foundation. While many
states require a group to contain at least two people, in these states single
business owners are guaranteed access to health insurance that is also sold to
small employers. The benefit of group plans is that you may receive lower
premiums, as many policy holders typically have more negotiating muscle than a
single person.
It's also important to note
some states place restrictions on when sole proprietors can sign up for group
coverage, Claxton says. In New Hampshire, for example, self-employed
individuals may purchase group coverage in March and September each year, while
in Florida open enrollment takes place in August.
In about a dozen other
states, entrepreneurs can join group health insurance plans via industry and
professional associations and local chambers of commerce. For more on low-cost
health insurance offerings for small businesses, click here.
Private Insurance
For those living in most
other states, including Virginia, Kansas, Maryland and the District of
Columbia, joining group plans when you're solo isn't an option. Instead, these
entrepreneurs can only elect individual coverage via the private health-care
market.
That's what
then-50-year-old Janet Acklam did 10 years ago when she left the corporate
world and started her own market research consultancy in Walnut Creek, Calif.
She and her husband opted for individual coverage — and have dealt with sticker
shock on many occasions.
Acklam and her husband have
been forced to raise their deductibles several times to keep up with premiums,
which increase every year and each time the couple crosses a new age bracket.
Today, they each have $5,000 deductibles and still pay nearly $15,000 a year in
insurance premiums. Still the coverage is worth the price, Acklam says.
"If one of us got seriously ill, we’d run the risk of losing
everything."
While expensive, individual
coverage does provide many benefits, including the ability to customize
policies to your individual health situation. And, you can deduct 100% of the
premium from federal income taxes.
Health Savings Accounts
An HSA is essentially a
savings account that allows sole proprietors with high-deductible health
insurance plans to use pretax dollars to pay for medical expenses such as
medications and routine office visits.
HSAs may not be appropriate
for older individuals or people with chronic illnesses, but an entrepreneur
who's young and healthy might want to consider one, says Mike Donahoe,
president of CBIZ M.T. Donahoe & Associates in Columbia, Md. And since the
funds within HSAs can accumulate tax free indefinitely, younger people who have
longer to contribute may find such an account to be particularly beneficial.
To get an HSA, the minimum
deductible amount for individuals is $1,100 and $2,200 for families. The
maximum contribution this year is $2,900 for individuals and $5,800 for
families. If you're 55 and older, a catch-up provision allows eligible account
holders to contribute an extra $900. For a primer on HSAs, check HSAFinder.com.
|
|