Sorry I’m at the beach every morning/afternoon so just saw your question.
People often worry about health insurance or don’t know what they’ll do without an employer providing it. You can double or triple your salary by consulting, reduce the percentage of taxes you pay, work your own hours and avoid any kind of corporate politics. Why worry about insurance when you can pay for your own for a couple hundred dollars a month or an HSA for $80/month? The cost of health insurance is negligible compared to the salary increase.
When I started consulting I just signed up for an HMO which I paid about $300 for monthly. Later I met with Rich (the purveyor of this fine site) and John and among many other good ideas they recommended that I sign up for an HSA. (I recommend that you go see Rich and John as well). Thanks to Bushy, self-employed people can get great health care by putting money into an account just like an IRA (it is tax-free and the amount you put in is reduced from your taxable income and it doesn’t get taxed when you spend it IF you spend it only for medical reasons AND it rolls over every year, accumulating just like an IRA, AND you can choose to invest all or part of it in stocks/funds/whatever!). Whew! What a run-on sentence.
This is NOT a FLEX account, which you lose if you don’t use it during the year. Here’s wiki’s definition.
How it works is:
1. You apply for high-deductible medical coverage.
2. Once the coverage is approved, open an HSA account at the bank/broker of your choice.
3. Make annual deposits into the HSA like you would to your IRA. I max them out. When you do your taxes, this contribution is deducted from your taxable income.
4. When you go to the doctor, pay with your HSA account bank card.
5. Get old, retire, don’t worry about medical because you’ve accumulated lots of money in your HSA.
Some notes: The things that qualify for “medical” are very flexible. If you can pay through your HSA account, it is tax-free. So things like sun block, vitamins, eyeglasses, pills, accupuncture, massage, chiropractor, and more are covered (see IRS publication 502)
The HSA only works with a “high deductible health plan” which is typically in the range of $3k to $4k. Meaning if you spend less than that you pay (from your HSA). If you spend more than that your health insurance pays (so you’re covered for major medical).
Before signing up for HSA I was paying $346 every month for an HMO so $4152 per year, PLUS the $30 hospital visits, $10 prescriptions, etc. Now, I pay a small monthly fee ($80) and only pay when I need medical care. If my care (for the whole year) exceeds my deductible the insurance kicks in. So worst-case scenario is I spend $3960 which I never get taxed on. In reality I spend much less than that because I don’t need medical care all that often. I am thinking of doing one of those “full body scans” for $2000.
