4 Healthcare Considerations for Start Up Entrepreneurs

Starting a new business can be extremely exciting and extremely terrifying at the same time. You have a great idea and are free and independent to conquer the marketplace, but every aspect of running a business rests on your shoulders.

After the mountain of preparation, state and tax filings, presentations and planning, many do not think about their healthcare finances until it’s too late.

The Affordable Care Act, also commonly referred to as Obamacare, brought about great change to the health insurance industry when it was signed into law in March 2010. Today all Americans have access to affordable health insurance, and are required to carry a policy for at least nine months of the year. If you fail to comply with the law in 2015, you are subject to a fine of $325 per adult or 2% of your income unless you qualify for an exemption. The fine or penalty is applied to your taxes, and you must pay the amount owed when filing with the Internal Revenue Service.

For entrepreneurs launching a new start up, there are several options for managing healthcare finances effectively and affordably. The bottom line is that you have choices. When considering your next steps, keep these health insurance facts in mind:

1. If you leave an employer group health plan behind to start your own company, you qualify for a special open enrollment period, which gives you the opportunity to buy a health insurance plan. You only have 60 days from the time you leave your employer plan to shop for a new healthcare plan on your state exchange, the federal health insurance marketplace or in the private marketplace.

2. You could qualify for a financial subsidy to help lower the cost of your health insurance plan. It’s important to remember that when calculating your subsidy, you must include your total household taxable income for the year, not just your entrepreneur income going forward. Based on your need, you could potentially save hundreds of dollars on health insurance with the assistance of the tax subsidy. Many states have reported that the average cost of health insurance is under $100 each month.

3. What if you miscalculate your annual income and receive a large subsidy to help pay for your healthcare plan? You will have to reconcile the difference with the IRS at tax time. It’s imperative to do your math wisely. Estimate more annual income than you actually receive, you will get a tax refund. Receive more income than you originally reported when applying for your health insurance? You will have to pay back the difference to Uncle Sam.

4. Finally, many entrepreneurs might want to skip the process and paperwork of enrolling in an Obamacare health insurance plan, and will opt for a short term health insurance plan instead. Short term health insurance is not compliant with the essential benefit requirements of the Affordable Care Act, which means individuals who purchase these types of plans are still require to pay a tax penalty for not carrying a qualified Obamacare healthcare policy. However, the cost of short term health insurance is typically one half the cost of an Obamacare plan, and even with a tax penalty, can wind up being less money overall.

As you can see, entrepreneurs have many choices. Making sure you understand how to manage your healthcare finances in the most cost effective and beneficial way is an instant win.

Jeff Smedsrud is Co-Founder and Chief Executive Officer for HealthCare.com, the nation’s leading search engine and comparison tool for health insurance plans.