Smart Healthcare Solutions for Self-Employed Doctors: Options and Strategies

Healthcare Costs A Lot

$15-25,000.

That’s the approximate value of the healthcare that most employers provide to you.

The US spends more than other rich countries on healthcare per person. Among developed nations in the OECD, America spends over twice as much as the average, shelling out $5,437 per capita. On average, Americans pay up to around $13,000 each year for medical care, according to the Centers for Medicare & Medicaid Services.

If you are transitioning away from employment to self-employment you may be shocked to find out exactly how much it costs.

And it "feels different" when you have to write the checks for this much money. Although it is a deductible business expense, it still feels like it's coming out of your pocket.

Even more intimidating for many of you is figuring out where to get healthcare coverage. This means you’ll need to be prepared to pay insurance premiums, out-of-pocket costs, and deductibles and potentially pay for unexpected medical expenses. Navigating the world of healthcare options as an early retiree can be particularly daunting for self-employed doctors due to their unique circumstances

8 Options For Healthcare

Here are some healthcare options self-employed doctors can explore as you transition from employment to self-employment:

1. ACA Marketplace Plans The Affordable Care Act (ACA) Marketplace offers a variety of health insurance plans tailored to individuals, families, and small businesses. These plans come with varying levels of coverage and premiums, allowing self-employed doctors to choose a plan that aligns with their healthcare needs and budget. It's essential for doctors to thoroughly review plan details, including benefits, coverage levels, deductibles, and out-of-pocket costs, to make an informed decision. While premiums may be higher without employer subsidies, ACA plans provide comprehensive coverage and are a valuable option for self-employed individuals and families.

2. Spousal or Domestic Partner Coverage Self-employed doctors who are married or in a domestic partnership may have the option to join their partner's employer-sponsored health insurance plan as a dependent. This can be a cost-effective way to maintain healthcare coverage, as employers often subsidize a portion of the premium costs for dependents. However, doctors should carefully review plan eligibility rules, coverage details, and cost-sharing responsibilities to ensure it meets their healthcare needs and fits within their budget.

3. Short-Term Medical Plans Short-term, limited-duration insurance (STLDI) plans offer temporary coverage for individuals transitioning between healthcare plans or facing gaps in coverage. While these plans are typically more affordable than ACA plans, they come with limitations, such as exclusions for pre-existing conditions and fewer benefits. Self-employed doctors may consider STLDI plans as a short-term solution to bridge the gap until they find a more permanent healthcare option. It's crucial to review plan terms, coverage limitations, and renewal options before enrolling in an STLDI plan.

4. Health Savings Accounts (HSA) Health savings accounts (HSAs) are tax-advantaged savings accounts that allow individuals with high-deductible health plans (HDHPs) to set aside funds for qualified medical expenses. Self-employed doctors can contribute pre-tax dollars to an HSA, which can be used to cover deductibles, copayments, and other eligible healthcare costs. HSAs offer flexibility, as funds roll over from year to year and can be invested for potential growth. However, doctors should be aware of contribution limits, eligibility requirements, and tax implications associated with HSAs.

5. COBRA Continuation Coverage COBRA allows individuals and their covered dependents to continue their employer-sponsored health insurance after leaving their job temporarily. While COBRA provides continuity of coverage, it can be costly, as individuals are responsible for paying the full premium, including the employer and employee shares, plus a 2% administrative fee. Self-employed doctors may consider COBRA as a temporary solution to maintain healthcare coverage while exploring other options. However, it's essential to weigh the costs against the benefits and consider alternative options for long-term coverage.

6. State Specific Options Some states offer programs designed to provide affordable healthcare options for residents before Medicare eligibility. These programs may include state-sponsored insurance plans or subsidies for low-income individuals and families. Self-employed doctors should research state-specific healthcare options available in their area and determine eligibility requirements, coverage details, and costs associated with these programs.

7. Membership Based Group Health Plans Health-sharing ministries (HSMs) offer an alternative to traditional health insurance, where members pool funds to cover medical expenses. While HSMs provide cost-sharing arrangements for eligible healthcare costs, they may not guarantee payment for all medical expenses and typically exclude coverage for pre-existing conditions. Self-employed doctors considering HSMs should carefully review membership criteria, coverage guidelines, and potential risks associated with these plans.

8. Part-Time Work for Healthcare This involves taking on part-time employment primarily for healthcare benefits rather than income. Self-employed doctors may explore part medical jobs such as 0.5-0.6 FTE employment positions. Or depending on your income needs, you could choose a non-medical part-time positions at coffee shops, bookstores, or pharmacies to access employer-sponsored health coverage. While this offers an opportunity to maintain healthcare benefits while enjoying flexibility in retirement, doctors should consider the trade-offs, such as reduced free time and potential work obligations, before pursuing this option.

These healthcare options provide self-employed doctors with a range of choices to navigate early retirement and maintain access to essential medical care for themselves and their families. By carefully evaluating each option's benefits, costs, and suitability to their individual circumstances, doctors can make informed decisions to ensure their healthcare needs are met during retirement.

What I chose

I chose a combined HSA with a membership based health plan that is paid by my PC taxed as an S-corp. This includes dental and eye insurance. I then combine this with a fringe benefit plan from one of my C-Corps that covers all out of pocket healthcare expenses. Now let me explain each of these elements.

1. Tax Advantages of HSA: HSAs offer several tax benefits that align with your financial goals. Contributions to an HSA are tax-deductible, reducing your taxable income and lowering your overall tax liability. Additionally, funds in the HSA grow tax-free, and withdrawals for qualified medical expenses are tax-exempt. By contributing to an HSA through your S-corporation, you can take advantage of these tax benefits while setting aside funds for future healthcare expenses. With my C-corp fringe benefit plan, the HSA acts like a stealth IRA—since I won’t need to tap into it.

2. Comprehensive Coverage from Membership-Based Health Plan: Membership-based health plans, such as health-sharing ministries, provide an alternative to traditional health insurance. These plans typically offer cost-sharing arrangements for eligible medical expenses, providing comprehensive coverage for routine care, preventative services, and unexpected medical needs. By combining an HSA with a membership-based health plan, I ensure access to affordable healthcare while maximizing tax efficiency. My health-sharing premium is half of what traditional insurance would have cost me.

3. Utilization of S-Corporation Structure: As the owner of an S-corporation, you have the flexibility to allocate funds for healthcare expenses through your business. By paying for the membership-based health plan through my S-corporation, allows me to leverage pre-tax dollars to cover healthcare costs, reducing my personal financial burden while maintaining comprehensive coverage for my family.

4. Out-of-Pocket Health Coverage Fringe Benefit Plan: Additionally, by implementing an out-of-pocket health coverage fringe benefit plan through one of my C-corporations, I can further enhance my healthcare coverage options. This plan can provide additional financial support for out-of-pocket expenses not covered by your HSA or membership-based health plan, such as deductibles, copayments, and non-eligible medical costs. By structuring this benefit through my C-corporation, I can optimize tax efficiency and ensure comprehensive coverage for my family's healthcare needs.

The summary of this approach is that 100% of my healthcare is covered with pre-tax dollars and nothing comes out of my household’s pocket, and it costs less than my healthcare cost when I was an employee

The take home message is, although it can be a little scary, once you get your mind wrapped around it, typically you will come out ahead when you personalize your benefit plan through your self-employed business channels.

If you been thinking about transitioning to self-employment from employment, I say go for it! A great place to start your journey is be purchasing my course “Doctor, You Are A Business”. Sign up her now!

The next best place is to become a member of our SimpliMD community and begin your self-guided journey to micro-business competency—and you’ll get $2500 in products in association with your $99 membership.