Navigating Health Insurance as a Self-Employed Professional: What You Need to Know

As a self-employed professional, securing the right health insurance can be one of the most challenging aspects of managing your finances. Without the safety net of an employer-provided plan, navigating the complexities of health insurance is essential to protect both your health and your financial well-being. This is especially true for REALTORS® and other entrepreneurs who often face fluctuating incomes and unique financial circumstances. In this guide, we’ll walk you through your options, help you make informed decisions, and show you how to take advantage of tax benefits available to the self-employed.

1. Understanding Your Health Insurance Options

Without employer-sponsored health insurance, self-employed professionals like REALTORS® must seek out their own coverage. Here are the primary options available:

• Marketplace Plans: The Health Insurance Marketplace, established under the Affordable Care Act (ACA), offers a variety of plans categorized into Bronze, Silver, Gold, and Platinum levels, based on cost-sharing structures. Income-based subsidies can help reduce premiums, making these plans more affordable for those who qualify.

• Private Health Insurance: If you don’t qualify for subsidies or prefer more flexibility, private health insurance plans purchased directly from insurers or brokers might be a better fit. These plans can offer a broader range of coverage options but may come at a higher cost.

• Health Savings Account (HSA)-Eligible Plans: High-deductible health plans (HDHPs) are often paired with Health Savings Accounts (HSAs), allowing you to save pre-tax dollars for medical expenses. This option can be particularly appealing for healthy individuals who want lower premiums and the tax advantages that HSAs provide.

• COBRA: Recently left a job with employer-sponsored insurance? COBRA allows you to continue that coverage temporarily, though you’ll be responsible for the full premium. This option can be pricey but might be worth considering if you need time to explore other options.

• Medicaid: Depending on your income and state of residence, Medicaid may provide comprehensive coverage at little to no cost. It’s an important option to consider if you meet the eligibility criteria.

2. Choosing the Right Plan for Your Needs

Selecting the right health insurance plan as a self-employed professional or REALTOR® requires careful evaluation of your specific needs:

• Coverage Needs: Assess your healthcare needs, including any ongoing treatments, medications, or family coverage. Consider how much medical care you expect to use over the next year and choose a plan that aligns with those needs.

• Premiums vs. Out-of-Pocket Costs: Finding the right balance between monthly premiums and out-of-pocket costs is crucial. Lower-premium plans often come with higher deductibles, which might be suitable if you’re generally healthy and don’t anticipate frequent doctor visits. Conversely, higher-premium plans with lower out-of-pocket costs may be better if you expect to need more care.

• Network Considerations: Ensure the plan includes your preferred healthcare providers and facilities in its network. Out-of-network care can be significantly more expensive and sometimes not covered at all.

• Prescription Drug Coverage: If you regularly take medication, verify that your prescriptions are covered by the plan’s formulary, and at what cost.

3. Tax Benefits of Health Insurance for the Self-Employed

One of the major advantages of being self-employed is the ability to deduct health insurance premiums, which can significantly lower your taxable income:

• Self-Employed Health Insurance Deduction: Self-employed individuals, including REALTORS®, can deduct 100% of their health insurance premiums from their gross income. This deduction covers premiums for yourself, your spouse, and your dependents. It’s a valuable tax benefit, though it’s limited to the income earned from your business.

• Health Savings Accounts (HSAs): If you have an HSA-eligible HDHP, you can contribute to an HSA on a pre-tax basis. These contributions are tax-deductible, grow tax-free, and withdrawals for qualified medical expenses are also tax-free. An HSA can be a powerful tool for managing healthcare costs and saving for future medical expenses.

• Deducting Out-of-Pocket Medical Expenses: If you itemize deductions, you may be able to deduct out-of-pocket medical expenses that exceed 7.5% of your adjusted gross income (AGI). While this threshold is high, it’s worth considering if you have substantial medical expenses.

4. Managing Costs with a Health Savings Account (HSA)

An HSA can be an excellent way to manage healthcare costs while also benefiting from tax savings. To open an HSA, you must be enrolled in an HSA-eligible HDHP. Contributions to an HSA are tax-deductible, and the funds can be used to pay for qualified medical expenses tax-free.

For self-employed professionals who want to maximize their savings while planning for future healthcare expenses, an HSA offers a triple tax advantage: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are also tax-free.

5. Partnering with a CERTIFIED FINANCIAL PLANNER™ 

Navigating the complexities of health insurance can be daunting, especially when you’re balancing the demands of running your own business. This is where professional advice can make a significant difference. Partnering with a CERTIFIED FINANCIAL PLANNER™ who understands financial planning for the self-employed can help you make informed decisions about your health insurance options, ensuring they align with your overall financial strategy.

In addition, we have established relationships with healthcare insurance brokers who specialize in working with self-employed professionals and REALTORS®. These brokers can help you explore the best plans available and assist in finding coverage that fits your specific needs and budget. By leveraging these relationships, you can navigate the health insurance landscape with confidence, knowing that you have expert support at every step.

Securing the right health insurance as a self-employed professional is crucial to your overall financial health. Whether you’re looking to optimize your financial planning strategy or simply find a plan that provides the coverage you need, understanding your options and utilizing available tax benefits is essential.

Ready to take control of your health insurance and overall financial planning? Contact us today to learn how our financial planning and wealth management services, combined with our trusted network of insurance brokers, can help you secure your financial future. We’re here to help you navigate the complexities of being self-employed with confidence and peace of mind.