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As balance can be carried forward, an MSA can be used to accumulate a pretty healthy nest egg for retirement. In fact, a Journal of Financial Planning analysis calculated that if you contribute $1,500 per year into an MSA for 25 years, assuming a 12% rate of return, you'll end up with almost $1.5 million. That's assuming you don't draw from it to pay for medical costs, of course.
There are some limitations though. First, range of deductibles is limited to $1,500 - $2,250 for individuals and $3,000 - $4,500 for a family. Second, as we saw above, you can contribute only 65% of deductible as an individual or 75% for a family.
So, if you're an individual and you choose a policy with a $2,000 deductible, you'll be able to contribute 1,300 pre-tax dollars into an MSA each year. In other words, Uncle Sam pays for part of your health insurance/retirement fund. How fitting.
The money in MSA can be used to pay any medical expenses incurred before deductible is reached, as well as other eligible costs such as contact lenses and dental work. If you use money for anything else, you must not only pay tax on amount withdrawn, but a 15% penalty on top. (If you're over 65 when you make withdrawal penalty is not applied but you'll still have to pay tax.)
(By way, MSAs are also available to you if you work for a business with fewer than 50 employees.)
In short then, MSAs offer a very tax-effective and potentially lucrative way to self-fund part of your health care costs while dramatically reducing your premiums. If luck is on your side and you remain healthy, by time you reach retirement age, your MSA could well fund your retirement.
=> Self-Employed Health Insurance Deduction
Finally, self-employed can write off 70% of their health insurance premiums in 2002. This increases to 100% in 2003. That's only so long as total doesn't exceed net profit from your Schedule C minus deductions for one half of self- employment tax and Keogh, SEP and Simple contributions though.
Also, deduction can only be claimed for months when you weren't eligible to participate in a subsidized health plan from another employer (including your spouse's employer).
Self-employed workers who qualify for both self-employed health deduction and itemized medical deduction can write off other 30% this year on Schedule A. (Medical expenses are deductible on Schedule A only to extent they exceed 7.5% of adjusted gross income.)
WHAT TO DO IF YOU'RE UNINSURABLE
The foregoing is all well and good if you're able to get health insurance in first place. But what if you have a pre- existing condition that disqualifies you from an individual health plan and you can't get into a group plan? In other words, you can't get insurance at any price.
Although beyond scope of this article, Health Insurance Portability and Accountability Act (HIPAA) may offer you some protections. For more information about how HIPAA may help you obtain health insurance even if you have a pre-existing condition, visit http://www.hcfa.gov/medicaid/hipaa/content/hipsteps.asp .
=> Risk Pools
High-risk health insurance plans, also known as risk pools, are state-funded plans and are an important safety net for individuals who are denied health insurance because of a medical condition. They're available only in 29 states though.
To be eligible, you must be a resident of state from which you seek coverage (unless there's reciprocity between that state and state you reside in) and you must be able to prove at least one of following:
1. that you've been rejected for similar health insurance coverage by at least one insurer; or
2. you're presently insured with a higher premium; or
3. you're presently insured with a rider or rated policy.
You will not be eligible for participation in a risk pool if:
1. you're not a resident of state from which you seek coverage (again subject to reciprocity between states); or
2. you're eligible for Medicare or Medicaid; or
3. you've terminated previous coverage in plan unless at least 132 months have since elapsed; or
4. you're an inmate of a public institution.
For more information on risk pools in your state, contact your state health insurance department, national association "Communicating for Agriculture and Self- Employed" (1-800-432-3276) or visit http://www.selfemployedcountry.org .
Coverage via safety-net protections of HIPAA may end up being "risk-pool" coverage.
=> Healthcare Savings Programs
Healthcare savings programs are patient advocacy programs that minimize out-of-pocket healthcare expenses.
They're not insurance policies but rather programs that allow you to access networks of healthcare providers for same negotiated rates that large insurance companies enjoy. Savings range from 20% to 50%.
Not ideal but better than nothing. Also, since they're not insurance policies, all pre-existing conditions are accepted.
A modest monthly fee is usually required to participate. See, for example, Care Entree at http://www.careentree.com for $20 per month.
Although health insurance may seem like a luxury you just can't afford if your finances are already stretched to breaking point thanks to your home-based business, you never know what's around corner. Quite simply, you and your business can't afford not to have health (and disability) insurance.
You are your business's greatest asset. Protect it.
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Elena Fawkner is editor of A Home-Based Business Online ... practical business ideas, opportunities and solutions for work-from-home entrepreneur. http://www.ahbbo.com Also, visit Elena's newest site, Web Work From Home http://www.web-work-from-home.com
Elena Fawkner is editor of A Home-Based Business Online ... practical business ideas, opportunities and solutions for the work-from-home entrepreneur. http://www.ahbbo.com Also, visit Elena's newest site, Web Work From Home http://www.web-work-from-home.com