Health Insurance Options for LLC Owners Investors No W2s

10 Replies

Hello! This question is for full-time real estate investors who do not have anyone in their family receiving a W2 (i.e. no employees).

I quit my "W2 job" in December 2018 and our family now manages our real estate full time. We are currently on Liberty Share which is a healthcare sharing ministry that avoids the Obamacare ACA requirements and therefore has a very low premium (about $500/month for entire family). If you haven't heard of this, I recommend you check it out. If you have experience with it, would love to hear your thoughts, but that's not my main question.

I was looking into an Health Savings Account (HSA) which looks like a great option as well for minimizing medical costs (since most non-premium payments can be deducted via an HSA) but You must have a high deductible health insurance plan to qualify for an HSA. We don't qualify for an HSA because the healtcare sharing ministry does not qualify as health insurance. 

This got me thinking ... would we better off getting rid of the healthcare sharing ministry and going with a cheap, high-deductible traditional insurance plan combined with an HSA? I thought that Trump came out with new options of affordable high-deductible health insurance plans but I can't seem to find anything. Again, we do not have W2s so can't qualify for an HRA or anything that requires you to be an employee. We are also in California which may play a factor.

What do other investors do for health insurance? Do you know what the cheapest highest deductible plan is out there? Can it beat the ministry's $500/month plan for a family of 4? 

Thank you!
Kim

Here is anecdotal evidence from one data point (me). When I was working on a W-2, my employer didn't offer a health plan and I had to get my own coverage. I chose an HSA-compatible HDHC plan when they first came out in the mid 2000s.

I had the plan up until a couple of years ago (when I went on Medicare). For a single person in the HMO option, the annual premium for the HDHC plan was in the $600 a month range. The premiums kept increasing in the high single digits in those final years (down from double-digit increases many years ago). I paid all medical costs out of pocket instead of drawing on the HSA.

For the HSA, I funded it each year to the fullest and have it today as an additional tax-advantaged wealth building account. My annual contributions were excluded originally from my taxable income on my Federal return, but taxed on my California return because that state has not aligned its HSA taxation with the Federal tax code (as of 2015). If I use HSA money for medical services, the withdrawals are tax free. If I use the HSA money for non-medical services, it is taxed as if it came from a Traditional IRA (at the earned income rate).

Because most of us are going to need some type of long-term care in our final years and LTC is not covered by Medicare, people have to deal with it on their own (which currently costs in the $100K a year range). Companies offering LTC plans have been under financial stress because medical costs have risen faster than expected, which means those you bought it from a now-bankrupt plan have nothing to show for the premiums they paid. With an HSA, I'm in control of my financial destiny and have only myself to blame if I do something stupid with the money. Custodians offering self-directed IRAs are also allowed to offer self-directed HSAs. (My current HSA allows me to invest in mutual funds, which I'm doing.)

The takeaway is to look at your alternatives from both a current cashflow basis and a life-long cashflow perspective when making your decision.

DISCLAIMER: I'm neither a lawyer nor tax specialist, so do your own due diligence.

@Kim Hopkins Welcome! California outlawed President Trumps health plans. LibertyShare or other Health sharing ministries are a good bet. Liberty and one other scores pretty high. I am hoping things change soon here in California as I am in the same boat. I do not know how an HSA and a low deductible plan would work out but worth speaking to someone. The health share is pretty unbeatable. Good luck and keep us posted.

Health share plans are pretty comparable to my corporate healthcare plan now. I think the OP is trying to have her cake and eat it too. I would personally stick with the HealthShare plan. I don’t think it’s worth it to have an HSA if you have some ridiculous premium every month ($1500) with a sky high deductible.

@Account Closed Hi Roger, apologies for the delay. Thank you so much for the info! That was very helpful. I didn't realize that the medical expenses are not deductible on California taxes with an HSA. That's good to know. 

@Dylan Vargas @Peter T. My only concern with the health share plans is it seems they all have some sort of "disclaimer" clause that basically says at the end of the day, they don't have to cover an event if they don't want to. Like how a commission agreement with an employer says "we can change this plan at any time". With regards to the health sharing, does that concern you at all?

Originally posted by @Kim Hopkins :

@Dylan Vargas @Peter T. My only concern with the health share plans is it seems they all have some sort of "disclaimer" clause that basically says at the end of the day, they don't have to cover an event if they don't want to. Like how a commission agreement with an employer says "we can change this plan at any time". With regards to the health sharing, does that concern you at all?

 I understand the language but insurance companies have similar language and have also tried to stiff people on incredibly large claims. The reason why they're inexpensive and competitive for private "insurance" is because they don't accept everyone. It's for like minded individuals who have a lower chance of a catastrophic health problem. If you're worried about the risks, you'll have to get horrible Obamacare or go pay $1500-$2500 a month for a plan that makes you pay another $8000 out of pocket before you get any relief but they can try and not pay as well if you have some ridiculous injury/health problem. I personally think the medishare groups will only continue to get more popular. 

@Kim Hopkins Hello Kim! Yes, they dont have to pay. I have spoken to other people that use the health share ministries and these people have stated to me that the health share pays. Just remember its a little different and you have to submit bills etc. I will be enrolling and let you know how it goes.