YOUR BUSINESS AUTHORITY
Springfield, MO
by Christine Ballew-Gonzales
SBJ Contributing Writer
One caveat to the work-at-home and small-business boom is that many self-employed people must go it alone when it comes to health insurance issues. But according to area insurance agents, health care for the self-employed may be within financial reach.
MetLife account representative Dwane Turnage said individual insurance policies are just one option for the self-employed. But what many small-business owners might not know is that they may be able to purchase a group policy.
"Group policies are available for groups as small as two people," Turnage said. Quarterly wage and tax statements are used to verify eligibility.
According to Turnage, more insurance companies than ever are focusing their efforts on the self-employed and small-business insurance markets. "There are lots of companies now specializing in the two- to 99-person market," he said.
Being able to purchase health insurance via a group policy has advantages, Turnage said. "The major advantage of group coverage is that you generally get more bells and whistles," he said. "You get more comprehensive coverage, dental, vision, lower copays, etc."
Individual policies tend to be more basic in nature, sold as pre-packaged plans, Turnage said.
"With group insurance, you can customize your own plan much more than with individual coverage," he said.
Purchasing insurance on your own is more expensive, but not for the reason that most people assume. According to Turnage, the actual purchase price of the policy doesn't differ much from the price of insurance purchased by an employer but the self-employed worker is footing the whole bill.
"Employer contributions range from 25 to 100 percent," Turnage said. "The employer is sharing in the cost of health insurance."
Loren Winter, of Medical Insurance Resources, said small group and individual health insurance is his company's primary focus, and misconceptions abound when it comes to health insurance for small businesses and the self-employed.
"There are a lot of options that small-business owners aren't aware of," Winter said. "My No. 1 recommendation would be to set up a medical savings account with a medical savings plan."
A medical savings plan can be of benefit to small-business owners and the self-employed because premiums are lower because of high deductibles, Winter said.
Those contributing to a medical savings plan can put up to 75 percent of their deductible into the account, 65 percent if it's a family plan, according to Winter. Qualified medical expenses that are not covered by the plan can then be paid for out of the account.
Winter cautioned small business owners against purchasing basic medical plans, hospital-only or hospital-surgical plans.
"They would be better off to buy a comprehensive major medical plan that has a higher deductible, because it will give them full coverage in and out of the hospital," Winter said, adding that this type of coverage would prevent a financial disaster in the event of a catastrophic loss.
Dan Ruggeri, of Employee Benefit Design, said there are also hidden tax benefits to using medical savings accounts for health insurance needs. According to Ruggeri, a little known tax code, Section 105 of the IRS Code, could be the leverage small-business owners need to afford health coverage.
"The code enables people not only to fully deduct premiums but also deduct qualified expenses," he said. Qualified expenses can include deductibles, co-payments, vision and dental expenses. "Then, in year two, whatever monies are not used to satisfy medical expenses will continue to grow tax-deferred," Ruggeri said. "Then the participant is able to add additional money each year, whether it gets used or not."
And Section 105 benefits also apply to other types of health plans besides medical savings accounts.
Many accountants aren't even aware of Section 105, which Ruggeri said was originally created to benefit farmers. "These benefits could be of great importance to affording health care for self-employed people," he said. "People are missing a much bigger tax savings."
Ruggeri said he and his coworkers derive great satisfaction from shedding light on insurance issues and showing self-employed workers that they can afford coverage.
Ruggeri advised self-employed people and small-business owners to shop around for health insurance, choosing an insurance agency that has experience meeting the needs of the self-employed.
It's a mistake to automatically assume that you can't afford health coverage just because your business is a one-man or one-woman show, Ruggeri said.
He added that discount prescription cards and physician and hospital discounted coverage can even be purchased independently, without purchasing a policy.
Most insurance agencies will provide policy cost estimates for free, and taking the time to price several types of coverage is important, as rates vary widely, Ruggeri said.
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