Being your own boss is part of the American Dream. With our sustained high unemployment, setting up a sole proprietorship is also a pretty good economic survival tactic. The latest census data estimates there are 15 to 20 million sole proprietors in the U.S. today, about 80% of all the nation’s businesses. If you’re one of them, you’re well aware of the benefits and the disadvantages of going it alone. One of the biggest drawbacks is trying to find affordable group health insurance for self employed workers.
If you’ve recently left a job where your employer provided health care insurance, you’ve no doubt encountered some sticker shock when shopping for health insurance for sole proprietors. For starters, you’re now going to have to pick up 100% of your health insurance premium. Fortunately, that is a qualified deduction on your federal income tax return. The bad news is that you can no longer take advantage of the rate breaks generally extended to groups, for now.
As it currently stands, in most states, premiums for individual health insurance are assessed based on your health history, current health status, age, gender and other factors. Beginning in 2014, provisions in ObamaCare are slated to put new rules into place regarding individual insurance policies, as well as employer-provided plans. Insurers will no longer be allowed to bump up premiums based on your health, an existing disability, the fact that you’re pregnant or your gender. Insurers will also be limited in how much premiums can vary based on age.
In the meantime, you still need an individual health insurance policy that won’t break your budget. Fourteen states currently allow sole proprietors to form a group of one, which may help you qualify for more affordable group health insurance rates. These include: Colorado, Connecticut, Delaware, Florida, Hawaii, Maine, Massachusetts, Mississippi, New Hampshire, New Mexico, North Carolina, Rhode Island, Vermont and Washington. In most cases, you’ll need to have a business license or some other proof that you’re operating a legitimate business. Specific qualifying provisions will vary, so consult your state’s insurance commission website for details.
If you don’t live in one of those states, explore the availability of group health insurance for self employed rates through a fraternal organization, trade association or similar affiliation your may have. You can also look into a Health Savings Account coupled with a high deductible health care plan to keep individual premiums under control.