This post was created in partnership with Stride, the leader in helping freelancers and independent workers find and enroll in affordable health insurance.
Health insurance is critical for your physical and mental wellbeing, but it’s also an important component of financial wellbeing. Having the right health plan based on your needs and budget can be the difference between saving a ton on your medical bills or going into debt to get the care you need.
Unless you get health insurance through your employer, you’re on your own for finding the health insurance plan that’s going to best meet your specific needs. The good news is that Affordable Care Act (ACA) health insurance is more affordable than it’s ever been, thanks to new legislation from the American Rescue Plan Act introduced earlier this year. But you’ll want to be sure you find the right plan and get enrolled by the December 15th deadline—otherwise you won’t have coverage for next year.
Here are the top four reasons to make sure you don’t miss this deadline.
1. Health insurance saves you money
The number one (and most well-known) financial benefit of health insurance is that it saves you money on medical costs. Health plans pay a portion of medical expenses such as emergency room visits, hospital stays, and medications. Qualified Health Plans—those that meet the requirements of the Affordable Care Act—also pay 100% of costs for preventive care like annual wellness checks, flu and COVID-19 vaccinations, and screenings for cancer, diabetes, and depression.
Of course, health coverage comes at a price, in the form of a monthly fee called a premium—but there are plenty of ways to lower this cost. Thanks to financial help in the form of Advanced Premium Tax Credits—sometimes referred to as subsidies—most individuals can find quality, Affordable Care Act qualified health insurance costing less than $10 per month. Stride can help you find all the savings and financial help you deserve in just a few minutes.
2. Health insurance helps you plan
Knowing you’ll pay less overall for health care in exchange for the same premium every month can help you decide how much to set aside for predictable expenses. You’ll need to include things like your monthly premium and your regular medications when budgeting.
But how much should you save for unforeseeable medical expenses? ACA Qualified Health Plans come with guard rails that can help you decide how much to add to your emergency savings for possible medical care. There are two guard rails you should pay close attention to: your annual deductible and your out-of-pocket maximum.
Annual deductible
Your plan’s deductible is the amount you’ll pay toward your medical costs (except preventive care—these are 100% covered) before your insurance will start paying its portion of the bill. Deductibles vary by plan, but if yours is, say, $500, you can expect to pay at least that amount for any surprise health care needs, like broken bones or bad cases of the flu.
Your annual deductible is a good starting point for what you should set aside for your annual expenses. While some people don’t reach their deductible, it’s always possible that a surprise medical bill will push you over this hurdle.
Out-of-pocket maximum
Your out-of-pocket maximum is the most you can expect to pay for health care. After you meet this number, your plan will begin paying 100% of medical costs for the rest of the year.
Like deductibles, out-of-pocket maximums vary by plan. If yours is, say, $5,000, and you make room for this in your annual budget, you could avoid dipping into your other savings or going into debt to pay for your health care needs.
Consider your out-of-pocket maximum the ideal amount you should add to your emergency savings for medical costs.
3. Health insurance can lower your tax bill
If you’re like most independent workers, you’re always looking for ways to lower your tax bill, and there are two main ways health insurance can help: premium tax credits and a self-employed income adjustment.
Premium tax credits
If you don’t get health insurance from an employer, you’re not only eligible for an Affordable Care Act health plan, you’re likely eligible for tax credits that lower the cost of your monthly plan premiums.
Premium tax credits depend on your income, family size, location, and other factors. You don’t have to wait for tax time to receive these credits. If you qualify, they’ll be automatically applied to your monthly premium—you’ll pay only what remains. And you may be able to write this off, too, as a self-employment income adjustment.
Self-employment income adjustment
If you’re an independent or self-employed worker with health insurance, you can lower your tax liability by the amount you’ve paid toward your health insurance premiums. You don’t have to itemize your expenses to take this income adjustment.
The catch is that you must have a net profit for the year—meaning, you must claim more income than expenses on your tax return.
4. Health insurance can boost your retirement savings
Health insurance can help your retirement planning in two ways. First, spending less on medical bills can free up more of your budget for saving for later in life. Second, if you choose the right plan, you can open a tax-advantaged account that can help fund your retirement. This powerful tool is called a Health Savings Account (HSA).
HSAs allow you to contribute pre-tax dollars—up to $3,650 in 2022—to use toward qualifying medical expenses. This includes things your health insurance covers (like doctor visits and prescriptions) in addition to many things your plan probably doesn’t cover (like acupuncture and over-the-counter Tylenol).
You can use this account to pay for medical expenses at any time, all while saving on taxes. However, if you can avoid pulling from your HSA, your funds will remain in your account and grow tax-free, like a retirement account. You can even invest your HSA funds in the stock market so they grow faster.
To be eligible to open an HSA, you must have a high-deductible health plan (HDHP). That means, in 2022, you must choose a health plan with a deductible that’s at least $1,400 (for just you) or $2,800 (if members of your family on your plan too). The good news is, these plans are typically less expensive that lower-deductible plans.
Stay healthy—physically and financially
As you work toward better financial wellbeing, don’t forget that health insurance can play a huge role in helping you reach your goals. Having a health plan can help you save, budget, lower your tax liability, and boost your retirement savings.
With all these benefits, health insurance can also give you a whole lot of peace of mind—especially with Stride to help you find and enroll in the right health plan in as little as 10 minutes. Don’t miss the December 15 deadline to enroll!
The post 4 Reasons Getting Health Insurance Before Dec. 15 Is a Smart Financial Move appeared first on MintLife Blog.
