If you work for yourself, you know that the Affordable Care Act (ACA) has helped millions of self-employed Americans find a health plan within their means. But did you know there are other ways for you to save money on health insurance?
Let’s look at a few ways freelancers, solopreneurs, and small business owners can reduce their health insurance costs beyond the ACA’s subsidy model. We’ll begin with one of the perks self-employed people love most: the tax deduction.
You can probably deduct your premiums.
Not all self-employed Americans realize it, but health, dental, and qualifying long-term care insurance premiums are tax-deductible business expenses. The deduction was available before the ACA, and it’s still available now.
That said, your ability to take the deduction is subject to certain conditions, the most outstanding of which include:
- Your business has to show a profit. Self-employed people who earn nothing in a given year or incur a loss cannot deduct health insurance premiums. The deduction can only amount to as much as you earn from your business.
- You can’t combine income from multiple businesses to qualify for the deduction. To demonstrate a profit and become eligible for the deduction, you must link the deduction to income from a single business.
- You can’t have any other health coverage. If you’re covered by someone else’s health plan, you can’t take the deduction. This is also true if you’re eligible for coverage through somebody else and purchase your own health insurance instead.
While most self-employed people meeting these conditions will qualify for the deduction, always check with your accountant before filing your tax return.
Under 30? Consider catastrophic coverage.
Before the ACA, many self-employed Americans faced a challenging conundrum: buy expensive health insurance or forgo it entirely (and hope you don’t fall ill). A common solution was to purchase a catastrophic plan as a bulwark against devastatingly expensive health care costs. Coverage was minimal and deductibles were high. But premiums were low!
Due to the ACA requirement that all health plans sold in the United States include minimum essential coverage, many catastrophic health plans popular with the self-employed no longer exist. However, self-employed Americans under 30 can still purchase catastrophic coverage similar to what was available in the past. Today’s catastrophic plans include all mandatory health benefits, but there are limits on the number of primary care visits and preventative services covered before the deductible kicks in.
Premiums for catastrophic plans will be among the lowest on the market, but there’s a catch: nobody using them will be eligible for federal subsidies. Which means…
A Bronze plan might still be more affordable.
If you’re shopping for coverage and are wondering why some plans labeled catastrophic are more expensive than the ones labeled bronze, it’s probably because plans in the latter category allow you to apply a subsidy to your monthly premiums if you qualify. Ultimately, opting for catastrophic coverage can be a great way for freelancers and small business owners in their 20s to find affordable coverage. Just be aware that subsidy eligibility may allow you to pay less, or nothing at all*, for an even better product!
Cost sharing can lower your premium.
Self-employed Americans whose incomes fall within 100 to 250 percent of the federal poverty level may be eligible for an additional subsidy for some health plans on top of the one available to them for all Marketplace coverage. This subsidy is called a “cost-sharing reduction” and applies only to plans in the Marketplace’s silver category.
A cost-sharing plan could put Silver-level coverage within your means – even if you thought a Bronze plan was at the top of your budget! For qualified applicants, Silver plans with the cost-sharing reduction applied will offer costs comparable to Bronze plans.
Working for yourself doesn’t have to confine you to low-quality health insurance. ACA subsidies aside (and those alone can provide significant savings!) there are a variety of ways to save money on health insurance. Contact HealthMarkets today at (800) 429-5058 for more information about choosing a plan that works for you and your family.
* Premium subsidies will vary, depending on the area where you live, because premium subsidies are higher where silver plans cost more. The examples provided were generated using a subsidy calculator available on the marketplace and may not reflect the premium subsidies available to you, if you qualify.