Solving the Healthcare Conundrum
It can be both the hardest and easiest question for you to answer.
Hi-ya,
One of the most difficult questions to answer on your self-employment journey very well could be what to do for healthcare. Then again, it might be the easiest one you have. Today, let’s talk about the strategies to pay for healthcare and other caveats you should consider.
After a week off to explain a unique tax deadline for those running a limited liability company, it’s now time to tackle the next step in successfully transitioning towards thinking solo or self-employment. Once you have figured out what your pay cycle will look like, you now need to determine healthcare.
Why the difference? For those who have partners with day-jobs that offer health insurance, it becomes a no-brainer. In most cases, you will simply sign up for health insurance under a family plan through your spouse’s employment. Through this, you typically can get the most coverage for the least amount per month. One little caveat, however: you won’t get to write off the premiums on your taxes. Normally, that’s fine. The ease of employer-covered care and reduced cost of coverage still makes it the best option.
What if you don’t have a spouse or your spouse doesn’t have employer coverage? Then it requires a bit of searching and financial planning.
If you’re looking to become or are self-employed, and need this coverage, then consider two things. First, shop for health insurance on the public marketplace. The plans available to you will differ by state, but you should be able to find coverage, depending on your needs. You’ll want to weigh your monthly premiums with the deductible. If you reduce your monthly premiums, then you’ll pay more when you need care and vice-a-versa, with all else being equal.
In some situations, the options will be very limited. If you have extenuating circumstances, like specific ailments or lifelong medical concerns, then plan to pay for greater coverage, since you know you will need it. But even if you’re young with no medical concerns, make sure to at least get coverage that will protect you in an emergency. You don’t want one medical bill wiping out your savings or pressuring you to return to the workforce.
Planning for this cost should be done when you’re evaluating your monthly needs.
The second thing to remember: if you’re buying the insurance out of pocket or through your business, you can deduct the premiums come tax time. It will help reduce the impact of the insurance on your yearly spending.
Remember, while it’s a daunting expense, health insurance is a concern that can be planned around. Don’t let the fear of it keep you from stepping out on your own. Instead, weigh the options and add the need to your monthly costs. Ensuring you can make more than the monthly costs will give you a starting point as to what’s your bottom line mark to earn in order to fund your new venture.
Some extra Solo links:
If you’re self-employed, you’re not alone. New research estimates that as much as 15% of the workforce may operate as independent contractors. (Bloomberg)
Want to know my least favorite piece of advice for the self-employed or to a small business owner? Let’s just say it involves both the business and personal side of the job. (Thinking Cap)
The IRS is warning taxpayers about scams that use a COVID-era form for the self-employed. If you hear someone asking for the Form 7202, then hang up. (IRS)