I created my very first website back in November of 2004 while serving in the U.S. Army. In mid 2007 I got out of the Army and went full time. I had a wife and son at the time (I now have a wife and two sons) and had no health insurance, aside from the VA for myself, which is pretty scary in itself.
Once I had my income high enough to afford health insurance (it took me a good year to really increase my online income) I finally decided to go ahead and get a good insurance plan. So I found a PPO plan with Anthem Blue Cross & Blue Shield and it wasn’t too bad. I think I was paying $400/m. or so for my wife and son. Then they kept raising our premium, so we switched to Humana.
After 5 years of paying high monthly premiums and not using nearly as much for doctor bills as we paid in monthly insurance premiums, I started doing a little research. What I found in my own research and after speaking with my CPA was that for MOST self employed people, the smartest option for family health insurance is to do the following:
1. Get a high deductible “catastrophe” plan that is HSA (health savings account) eligable. This plan will not pay for any bills under your deductible (our deductible is $10,000) but once the deductible is met it pays 100%.
2. Go to your local bank and tell them you want to open up a health savings account. These accounts aren’t super popular because they mainly benefit self employed people, so the banker MAY not even know what it is. If that’s the case, just talk to another banker until you find one who knows what it is. Any good banker will know.
So now, the catastrophe plan is going to have a MUCH cheaper monthly premium. So you’re going to save alot of money if you’re going from a PPO or any other kind of individual health insurance plan. So figure the difference between the old premium and the new premium. For us it was about $200/m. and take that amount and deposit it into your health savings account every month. You will now use the debit card from your HSA account to pay for all bills under $10,000.
There are two benefits to doing this:
1. Since you will be opening a HSA account, as opposed to a regular savings account, you get to write off all of the money
that is in that account at the end of the year that is contributed to the account. (I originally thought it was the amount of money that was in the account at the end of the year, but ACTUALLY the deduction is on ALL contributions, which is great.)
2. You are not filling the pockets of health insurance CEO’s by overpaying for health insurance!
REMEMBER, health insurance companies MAKE MONEY off of most of their customers. It is a business and businesses don’t survive if they don’t make a profit!
Obviously you should assess your own finances (and/or talk to a good CPA) before making this decision, as we’re all different. If you run to the doctor every time your child has gas (like we did when our first child was a baby) or you or a family member has one or more serious conditions then a full blown, expensive plan may be best for you.
But if you’re an average family who only goes to the doctor for serious issues and checkups, there is a good chance that going the route I explained above will save you money both directly and indirectly in the form of cheaper premiums and a nice tax write-off. And once you get your HSA account up to the 10,000 mark, you don’t need to keep feeding that account, so once you get there you can eliminate that money cost as well.
This is something I wish I would have known years ago! It would have saved me thousands and thousands of dollars. Live and learn