Afford your Life: Health Insurance for the Self-Employed
Okay, maybe a boring topic, but it's that time of year again when you can enroll in a health plan, and since I've done a lot of research, I wanted to share a few things that I think I've figured out. (I put emphasis on "I think" because I'm not an expert, if you see something that's not correct, please let me know!)
First, you CAN afford health insurance. The trick is calculating your income correctly. Health plan costs are adjusted according to a specific calculation of monthly income amounts and subtraction of certain other amounts. If you're self-employed, you have a bit of an advantage. Here's an example:
Let's say what you make on average per month is $2500. If you're self-employed, you can subtract (deduct) the following costs from this income amount to get your final adjustment, then use that amount to report on your Healthcare application:
Money contributed to Self-employment retirement plans (not Roth IRAs, unfortunately) Let's say you contribute $200 per month, now your total "income" would be $2300 instead of $2500.
Self-employment health insurance costs and premiums (this is awesome because anything you spend on health insurance can be subtracted from your income to in turn get you a lower cost plan!) Let's say you spend $60-75 (yes, it's possible - see the final paragraph!) on your monthly payment and see a specialist once a month for $5-10, now your "income" would be $2215 instead of $2500.
Money you spent on the cost of running your business (things such as office expenses, advertising, professional fees, rent and utilities for your studio, printing costs, small equipment costs (larger equipment or expensive equipment that will last over a year would be depreciable - the cost would be divided over the lifespan of the item - I'll write a blog post on this later), meals and travel expenses related to business, and lots of other things.) Let's say you spend on average $300 on the cost of running your business, $250 on renting a studio, and $100 on business meetings (50% of this cost is deductible), now you're down to $1615.
So, if you're following this guideline, instead of entering your yearly income as $30000, you'd enter it as $19380. This will get you a substantial discount on your health insurance - instead of $250 for a silver plan, you could pay around $70! (I ran the income listed with a birth year of 1979, non-smoking, female, and a household size of 1)
Oh, and a final note, if you're shopping around, you'll notice that SILVER plans offer the best cost-to-benefit option. If you're getting a discount, you want to go with a Silver plan since the cost-sharing and premiums are the cheapest with the best benefits and lowest out-of-pocket expenses.