Thinking of leaving the security of a good-paying job to launch a home-based Internet business of your own? Thousands of budding entrepreneurs make this decision every year.
Sadly, caught up in the heady excitement of starting a new venture, many of them overlook the importance of maintaining health coverage as part of their safety net during the transition. The results can be disastrous.
Young Often Take Risks
Young people with no real history of health problems are perhaps the most likely to let the matter of health insurance slide, reasoning that they can make arrangements for coverage once their new venture is up and running smoothly.
In an instant, an auto accident or doctor’s visit about a nagging cough that just won’t go away can set in motion a series of events — and expenses — that will forever cast a shadow over your future.
Older individuals can also fall into the trap of thinking health insurance is not a top priority, especially if they have been relatively healthy most of their lives.
As they get a home-based Internet business up and running, small business owners must make sure their health insurance needs are met so that they can solely focus on running their companies from the comforts of home.
So what options do you have?
For the past few decades, employees who have lost their health coverage due to voluntary or involuntary job loss, among other reasons, have been eligible to continue that coverage — albeit at higher cost — under COBRA. This coverage gets its name from the Consolidated Omnibus Budget Reconciliation Act of 1986.
This legislation amended the Employee Retirement Income Security Act, Internal Revenue Code, and Public Health Service Act to provide temporary continuation of group health coverage that otherwise might be terminated.
Can Be Very Costly
COBRA coverage, generally available for 18 months after you’ve left your job, can be very costly.
While your employer may have paid for half or more of your health coverage while you were on the job, once you’ve left and started a home-based Internet company, you’ll be responsible for paying up to 102 percent of the costs of the plan. This covers the employee’s share, employer’s share, and up to 2 percent more in administrative costs.
COBRA is still available now that the Affordable Care Act, best known as Obamacare, is the law of the land.
However, it is probably not your best option for getting the health coverage you need as you set up your home-based business.
Buying Individual Coverage
Your best bet for saving on individual health insurance would be to buy a plan from one of the government — state or federal — exchanges created under the new law.
The 2014 deadline for open enrollment under Obamacare passed on March 31, 2014, although the government extended the deadline for a few days to allow those already in line for coverage to complete their transactions.
The vast majority of those who failed to buy health coverage during the open enrollment period will be forced to wait until the beginning of the next open enrollment period on Nov. 15, 2014.
Special Enrollment Period
However, if you left your job after this date, you may qualify for a special enrollment period.
Others who may be eligible for special enrollment privileges include people who’ve experienced certain life events — marriage or the birth of a child — that involve a change in family status.
Individuals may be eligible for government subsidies to cover a portion of their health insurance costs based on their income during the year in which the coverage is in force.
Short-Term Income Decline
While you may be leaving a well-paying job with an annual income in excess of the level eligible for subsidy, your decreased income during the current year will be the decisive factor in determining your eligibility for subsidy.
In applying for individual coverage for any given year, the exchange will probably use your previous year’s earnings as an estimate of your anticipated earnings for the year in question. If you anticipate significant changes in income — either up or down — you can provide that information on your application for health coverage.
Regardless of the amount you estimate, at the end of the coverage year your actual income will be reconciled with your estimate, so you may qualify for a subsidy retroactively.
Don’t Go Without
No matter which option you choose, do not under any circumstances let the matter of health coverage fall by the wayside.
At the very least, arrange for a plan with high deductibles that would protect you against financial ruin in the event of a catastrophic health event or injury.
You’re embarking on an exciting new venture right under your own roof, one that you may have dreamed of for years.
Don’t let a health coverage oversight turn those dreams into a nightmare.
Photo credit: Image courtesy of phasinphoto / FreeDigitalPhotos.net
About the Author: Don Amerman is a freelance author who writes extensively about a wide array of business and personal finance topics.