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Steve Windhaus Ask the Small Biz Adviser

For the entrepreneur who is supporting a wife and children, getting health insurance coverage for the family can make earning a living even more difficult.

Dear Small Biz Adviser
I am interested in learning where I can obtain information about purchasing health insurance for my family (three members) at group rates. My husband owns a small business, consisting of just himself. How can I find out if it is possible to form a group, in order to purchase more affordable health insurance? Thank you for your anticipated response.
Concerned

Dear Concerned:
Being self-employed and a father of two, I empathize with your concerns about protecting your family. Health insurance for small-business owners has been an issue of great concern from many years. In fact, a recent survey put the cost of health care as small-business owners' No. 1 concern -- the same rank it's held in the survey for the past 14 years.

Typically, for small firms, cash flow is simply insufficient to include family medical expenses in the first years of the venture.

If you're self-employed, only 60 percent of the premiums you pay paid for yourself, your spouse and your children can be deducted.

And there are conditions under which the deduction can be taken:

  • You must have been self-employed and earned a net profit for the year; or
  • You must have been a 2 percent or greater shareholder in an S corporation from which you received wages.
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If the spouse of the self-employed individual was employed elsewhere and was eligible for group coverage, then the self-employed person's business concern is not allowed to deduct any health insurance premiums for that period of eligibility

The good news is that the tax laws will soon tilt in the favor of the entrepreneur. In the tax year 2002, the deductible rises to 70 percent, and the following year it rises to 100 percent. See IRS Publication 535, Chapter 10 for details.

As for seeking a group coverage program, that's a great idea. You can probably find an existing group -- or start one of your own.

There are so many group health coverage plans out there right now. And the very first place you should inquire is the local chamber of commerce. More often than not, most chambers provide the health insurance coverage option to their members.

The opportunity for accessing group health coverage is not limited to local chambers of commerce. You can reach out to state, regional and national associations. For example, the National Federation of Independent Business health insurance program is offered to its membership.

I took a quick spin online to find similar programs, and came up with the following items that may be of interest:

  • eHealth Insurance appears to be a nonprofit group that directs you to low-cost, self-employed programs in 21 different states. Fill out an online form and they give you a quote.
  • The International Furniture Rental Association Health Insurance program is a classic example of a group health coverage program that covers members of a specific industry. You may want to see if such an association exists for your husband's type of business, and whether or not they offer the same service.
  • Kaiser Insurance, located in California, is the example of how an insurance agency can create a group health plan for the smallest of groups. You may want to show this site to your local insurance agents to see if they can meet or beat this type of program.

I hope this has been of assistance to you and your husband.

Bankrate.com writers base their answers on our editorial content and advice of financial professionals. We make no claims or representations about the accuracy, timeliness or completeness of such content, advice or the answers provided to you. Our content, advice and answers are intended only to assist you with your financial decisions. However, by its nature such information is broad in scope. Your financial situation is unique, and our content, advice and answers may not be appropriate for your situation. Accordingly, we recommend that you get different opinions and seek the advice of your accountant and other financial advisers before making any final decisions or implementing any financial or investment strategy.

-- Posted: Aug. 18, 2000

 

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