Self-employed Health Insurance

Self employed Health Insurance.Things have changed a lot for the better for self-employed individuals post the introduction of the Affordable Care Act. Things were a bit different for self-employed individuals prior to the Act, as they either had to pay for pre-existing conditions or even worse could not get cover for the same. The ones who did manage to get health coverage for themselves would be severely restricted in the form of caps. In fact, insurers took the liberty of canceling the insurance over smaller technical issues as well.

There are no doubts that a health insurance is one of the larger expenses that one has to undergo. But thanks to the Affordable Care Act, self-employed individuals now have access to better protection and some even benefit from tax credit systems. However, it is essential to understand the health insurance in and out so that you can make the most of it. Here are some important details.

Exchanges

As per the Act, each state must put up an exchange or marketplace where insurers can sell their health plans. The Act also made way for subsidies for individuals who could not afford the plans on their own. If your annual income is less than a certain level, you qualify for tax credits as well. As per the official statistics, people who took the tax credits saw a dip in their insurance cost by as much as 73%.

Subsidy

Being aware of your health insurance plans was never this beneficial. You can easily reduce the premium costs by knowing details of the plan. The usual $396 plan is prior to any form of tax credit. If you factor in all of those, the effective price is just $106 per month. The subsidies are also valid for middle class families. To be more specific, if your income as an individual is less than $47520 and $97200 for a family comprising of four members, you qualify for the subsidy. However, it is important that you purchase your health insurance from the marketplace.

Deductibles

There are quite a few means by which you can reduce the premium costs of your health insurance. Opting for a higher deductible is one of the better approaches. If you are someone who is healthy and does not want to spend a lot on your health insurance, you can take this road. By opting for higher deductibles, you agree to pay a higher amount from your pockets if you fall sick as compared to someone with lower deductibles or no deductibles at all. It is at times referred to as catastrophic plans. But it doesn’t qualify for any tax credits and you must be within the age limit of 30 years to avail the same.

Tax Planning

The Affordable Care Act brings down the cost of the premiums after accounting for subsidies up front. Unlike some other tax credit systems where you must pay and wait for credits post filing your tax returns. When you opt for a health insurance you must provide your projected earnings for the rest of the year and the subsidy, if any, is then calculated on that amount. The tax credits are adjusted to your monthly premium amounts so that you do not get the pinch of it. When you file for taxes, ensure that you have been taking the right subsidy amount. There are chances of over or underestimation, but that can be taken care of during tax filing.

Another benefit for self-employed or freelancers is that they use the health insurance premiums as deductions. This is applicable even if your other deductibles do not cross standard deduction set.