Managing The High Cost Of Healthcare As An Entrepreneur
Alex, a Denver-based landscape photographer, reveled in her entrepreneurial journey. From the Rocky Mountains to the city's vibrant energy, she was her own boss, finding inspiration at every turn. Yet, there was one persistent concern: healthcare. The high costs weighed on her as she carefully considered expanding her coverage.
Alex isn't alone. Countless self-employed individuals and small business owners find healthcare a major hurdle. But don't lose hope! There are smart ways to navigate the system and find plans that fit your needs and budget.
The Healthcare Divide: Self-Employed vs. Traditional Employees
Unlike those in traditional employment, who often have access to subsidized group health plans, entrepreneurs are responsible for finding and funding their coverage. No wonder healthcare costs are consistently reported as a significant worry for the self-employed.
Strategies to Tackle Healthcare Costs
Tax Deductions: Your First Line of Defense The good news is that the IRS allows self-employed individuals to deduct 100% of their health insurance premiums, including coverage for spouses and dependents, from their taxable income. It’s available even if you don't itemize and can significantly reduce your tax burden!
(Caveat: This isn’t available to shareholders of S-Corporations, so if you have elected S tax treatment, know that this works differently.)The HSA: A Powerful Savings Tool If you're relatively healthy and opt for a High-Deductible Health Plan (HDHP), consider opening a Health Savings Account (HSA). HSAs offer a triple tax advantage: contributions are pre-tax, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free. It's like a supercharged savings account for your health!
Finding Your Plan: Marketplaces, Medicaid, and More Thoroughly explore your options. State marketplaces like Connect for Health Colorado (or Healthcare.gov for those without State marketplaces) often have plans eligible for income-based subsidies. For those with limited incomes, Medicaid may be an option too. Additionally, your spouse's employer-based plan or a professional association you belong to might offer more competitive group health insurance rates.
COBRA: A Bridge for New Entrepreneurs If you're newly self-employed, COBRA may be a temporary solution for up to 18 months, allowing you to keep your old employer's plan while ramping up your business.
The Key Takeaway
Managing healthcare as a self-employed individual does require effort, but it's doable. By understanding tax deductions, utilizing tools like HSAs, and exploring your plan options, you can secure affordable coverage that gives you peace of mind. Remember, healthcare is an investment in yourself and the long-term success of your business. Check with your accountant and tax professional to ensure you’re taking the proper deductions, and review the HSA with your financial planner.