The Self-Employed and HMOs
Health Maintenance Organizations (HMOs) are usually less expensive than other types of health insurance plans. There are benefits and disadvantages to most everything in life; this indeed holds true with health insurance for self-employed people who have HMOs. As already stated, HMOs are less expensive, which is why most people select an HMO in the first place.
A self-employed health insurance within an HMO is a little more rigid than a Preferred Provider Organization (PPO). With an HMO you can only choose a health care provider that is on your provider list. Healthcare cost will not be covered once the individual choose a doctor outside the HMO network. The primary doctor will be a member of the HMO, and if there is a need for a specialized healthcare, the primary physician will refer their patient to another doctor who may or may not be in the HMO. There are only a few specialists who are members of HMOs like the internists and surgeons because they would suffer reduction in pay.
Healthcare plans were adapted in the HMO system in the late 1970s as part of the managed care. Healthcare costs could skyrocket without any restrictions in any form before the HMO system was founded. An HMO insurance provider puts a limit on what health care providers can charge you for their services. The positive effect of cost containment allows the health insurance industry to make the HMO insurance premium more affordable.
Premiums for the self-employed insurance covered with HMO insurance can be deducted as a business expense on the income taxes. In order for the premiums to be eligible for tax deductions, the individual’s health insurance policy must be owned by that individual’s business and in their name. In 2002 you could only deduct 70 percent of your premiums, but now the premiums for health insurance for the self-employed are 100 percent deductible. The tax law was changed in 2003. The good thing about deducting your premiums from your taxes is that you no longer have to fill out the long itemized deduction forms.
Health care prices can mount up even with an HMO. As a general rule, health insurance pays 80 percent of your doctor, hospital, and other health care related expenses. Unless you have a supplementary health insurance plan, the other 20 percent of the medical bills not covered by insurance will be your responsibility. If you were to use your IRA account to pay those outstanding medical bills, you may not be charged the normal 10 percent early withdrawal penalty fee, which is a very good thing for the small business owner.
