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Health Insurance for the Small or Single Owner Business

By Compuquotes Team on June 3rd, 2008
Health Insurance

Among the many concerns faced by small business today is the cost of health insurance. Even scarier is not having health insurance with the costs of health care spiking ever higher each year. You may have left a job in which you had health insurance provided in part or whole, by your employer. You mot likely extended your insurance coverage for up to 18 months through what is known as COBRA. But what should you do now that the expiration date on your present health coverage is approaching or has already passed?

It is possible that you could secure yourself a good rate with the same insurer for an individual health insurance plan. It wouldn't be a bad idea to at least check with them to see what they may have to offer you. This will also provide you with the pricing which you can compare with other health insurance plans with other insurers to find the best rates and coverage.

Your former employer most likely was able to offer health insurance to its employees through group insurance plans. In these an employer most often pays a portion of the plans costs, while enrolled employees pay the rest. How much you paid depended on whether you were only insuring yourself or also adding family to your health insurance plan. The number of members in your group health insurance plan also factored into the costs you paid as an individual because the overall costs of the plan was spread out among members.

Group insurance is affordable for bigger companies, but can be beyond the means of smaller business. This can be a catch-22 situation for the small business. To compete with other businesses you want to be able to offer employees some sort of plan for health insurance as an incentive for them to work for you. But when you have 50 or fewer employees, there are less of them to spread the overall costs over, which reduces individual costs. That is why traditional group health insurance plans are not a viable solution for most small businesses.

There is a much more affordable solution for the small or single owner business to ensure funds are available to cover the costs of health care. Health savings accounts are an option for the individual and those small businesses with small workforces. This is a combination of a high deductible health plan with a non-taxable savings account for health care.

Why are health savings accounts gaining on popularity among small business owners and employers alike? Contributions are not taxed and neither is the money that is withdrawn to pay for qualifying health care charges. Ownership of the savings account remains with the individual even when they move to a different employer. Money left in the account at year's end remains and continues accruing tax free interest. Employers can contribute to the health savings accounts of employees without incurring payroll taxes. Upon retirement the funds can be withdrawn at a significantly lower taxing base than found within traditional IRA's. Health savings accounts can be used to pay for other expenses aside from health care. Note that withdrawing money from a health savings account for other than health care costs typically results in a 15% penalty. However, paying a penalty is worth it if you are in desperate need of money to pay for something that just cannot wait until a better alternative becomes available for you.

As with all health insurance plans, health savings accounts vary by provider. Make sure that you understand how one being offered to you works before opening and depositing money into it. Affordable health insurance is possible for the small, single owner business. No one should be without health insurance, if it can at all be avoided.

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