There are many benefits to being an independent contractor and owning your own business: you are able to set your own hours, you have the flexibility that you often do not have while working for someone outside the home, and you have absolute control over every aspect of your company.
However, there are also drawbacks to being an independent contractor, and one of these is the lack of health insurance.
However, having your own business does not have to mean you do not have access to health care; there is a very effective health care plan for the self-employed. Read on to discover the key to health insurance for independent contractors.
An independent contractor has three options to pay for medical expenses:
The first option is to use a traditional health insurance plan. However, many self-employed contractors discover insurance plans are expensive, restrictive, and complicated.
The second option is to pay for medical expenses out-of-pocket, without insurance. By opting to self-insure, the contractor is on the right path but soon discovers the tax consequences of paying for a medical expense personally (with after-tax dollars).
The third option is a Health Spending Account. An independent contractor can effectively use a Health Spending Account as a tax vehicle and convert personal medical expenses into legitimate business expenses. In the process, the contractor's business saves thousands of dollars in taxes.
With no premiums, restrictions, and considerable savings, the Health Spending Account has become the go-to alternative for incorporated contractors to pay for personal medical expenses.
In addition, independent contractors enjoy a wide and deep range of eligible expenses with a Health Spending Account. Here is a sample of these eligible expenses:
• All prescription drugs
• All dental, including orthodontics
• All optical, including laser eye surgery
• Paramedical, including chiropractor, massage, physio & orthotics
• Premiums, including health and dental premiums paid through spousal plan
• Other Expenses such as MRIs & tuition for special needs
The bottom line is that a Health Spending Account is the most cost-effective method available today for independent contractors to pay for medical expenses. Instead of paying for medical expenses personally, as an after-tax expense, self-employed contractors can pay for medical expenses through their business, as a before-tax expense.
Related Reading: Health Spending Account Terminology for Small Business in Canada
Are you an incorporated independent contractor? Discover how the Olympia Health Spending Account can provide significant tax savings by downloading our free guide: The Beginner's Guide to Health Spending Accounts.