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Small business owners face a lot of difficulties in running their business. Paying for health insurance, or not being able to even afford coverage due to the rising costs, is one of them. If you are a small business owner you may have had health insurance while working as en employee that was provided in whole or part by your employer. When you quit your job to start your business, you may have used COBRA to extended your health insurance coverage for as long as 18 months. But you may be wondering what to do now if your current health insurance is about to expire or has already expired.
One possibility is using the same insurer to obtain an individual health insurance policy. You should at least check to see if maybe they can offer you a good rate. Checking with them will at least give you pricing that you can use when comparing it with other health insurance policies from other insurance companies to make sure you get the best coverage and rates.
Most likely your former employer offered health insurance for their employees by taking advantage of a group insurance plan. With group plans usually the employer pays part of the plan costs and the employees pay the remainder. How much you had to pay would have depended on whether or not you were just insuring yourself or your family as well. The number of members that were a part of your group plan would have also factored into how much your costs were. Overall costs of a group plan are spread out across all the members.
For large companies, group insurance is affordable. However for small companies that cost may be prohibitive. This is a tough situation for many small businesses. In order to compete for good employees with other businesses, one of the incentives you need to offer employees is a health insurance plan. However, if there are 50 employees or fewer in your business, there are not as many employees for spreading overall costs around. For this reason, group insurance plans usually are not a workable solution for a majority of small businesses.
There is a solution that is more affordable for small businesses and single owners to make sure that funds are available to pay for health care expenses. The option is a health care savings account for small businesses and individuals. This combines a non-taxable savings account that is used to pay for health care expenses with a health plan carrying a high deductible.
There are a few good reasons why health savings accounts are becoming more popular with employers and small business owners. Contributions to the health care savings account are not taxed, and the money withdrawn out of the savings account to pay qualifying health care costs is not taxed either. The savings account is owned by the individual, and even moves with them if they leave and go to work for a different employer. If there is any money left over at the end of the year, it stays in the savings account and continues to accrue tax free interest. Employers are able to contribute to their employees health savings account without having to pay payroll taxes on the contributions. When an individual retires, taxes are paid on the withdrawals but at much lower tax rates than on traditional IRAs. Individuals can use money in a health savings account for other expenses besides health care costs. However there is a 15% penalty if the money is not used for health care expenses. However, there may be times such as when an emergency or unforeseen circumstance arises when paying the penalty may be worth it.
Health savings accounts, just like other types of health insurance plans, will vary from provider to provider. You need to be sure you completely understand how one works before you agree to open an account and deposit money. It is possible for the small and single business owner to have affordable health insurance. Everyone should have health insurance if at all possible.
