Guide to Self Employed Health Insurance

Thinking of freelancing? Going out on your own? What's holding you back? Corporate benefits can be another way of saying "ball and chain" that keeps you tied to your day job.

But, the benefits of being self-employed can be far more compelling than what the corporation can offer. Want more time with the kids? Haven't you always wanted the power to choose your own clients? Or just simply choose when and where you work and how you dress along the way?

Of all the benefits that the corporation offers, health insurance is the one that you'll want to make sure you can make good on your own. I'm sure you've heard - we all have - how expensive it is, and how hard it is to get and keep coverage. It's not necessarily true.

There are several things for you to consider when looking for health insurance when you're taking the plunge into self employment.

First, in most cases when you're leaving a corporate position which provided you full health coverage, you will be eligible to retain that coverage for up to a year and a half. The Consolidated Omnibus Budget Reconciliation Act of 1985 - what the heck is that, you say? you might have heard of it as COBRA - is a federal law which guarantees you the right to continue your insurance after termination of employment.

Yep, that's right. Your employee would be violating a federal law if they did not allow you to continue your coverage.

As with any federal law, there are some 'gotchas' to watch out for. First, you need to make sure you are provided with, complete and submit the proper paperwork within the specified time limit of 60 days after the termination date.

You have to have had a "qualifying event", which can simply be voluntary termination. But, if you were fired for misconduct, you may not be eligible for COBRA.

You have to pay! Your former employer isn't going to subsidize you anymore.

Since employers typically cover 50% or more of health insurance costs for the employees, you can expect the cost to at least double from what you had been having deducted from your paycheck.

Your former employer can also tack on a 2% charge for transactional costs, and that's only fair because it does take time out of someone's day to manage this for you.





Action Steps
The best contacts and resources to help you get it done

Tips & Tactics
Helpful advice for making the most of this Guide

• Group Plans - Often an affiliation with a group, such as a small business association, can help provide a more affordable policy. Ask your agent.
• Pay Yearly - Ask your agent if you can pay a year in advance and save on your premiums.
• Higher Deductible - Talk to your agent about the difference in cost if you go with a higher deductible.
• Tax Benefits - Ask your CPA how to handle the payments, sometimes how you setup your new company and how you pay for the health insurance can make a major impact on your tax liability.
• Too Cheap? - Yes, you can go too cheap with health insurance. Make sure that any compromise you make to get a cheaper plan is acceptable to you, the last thing you want to do is risk your health to save a few dollars.