Health Insurance+ Advice Needed - Transition to FI / Semi RE

[aim-high]

Rather than stopping cold turkey, I plan on easing into RE.

This month I'll be setting up an LLC and switching over from being a full-time employee to a part-time consultant at roughy 20 hours per week.

I've run as an independent before so I'm fairly familiar with most of the business and accounting issues. I haven't had to purchase health insurance though in several years.

The initial plan is for a single-member (Husband/Wife) LLC and manage it as a disregarded entity.

I plan on roughly 85K in net profit.

Questions

1. Any suggestions on Health Insurance now that ACA is in place? Does it make sense to use healthcare.gov even if we don't qualify for a subsidy? Gold, Silver, Bronze? HSA or Not?

2. SEP or Solo 401k? We have other options for income so I don't mind sheltering as much as possible. I know how the SEP works as I had one for quite awhile. The Solo 401k is less clear to me. How does it work if I do not take any salary, in other words, I don't have payroll. How does the employer contribute a portion in that case?

Any other ideas, suggestions?

Thanks.

 

[Gotadimple]

Aim-High,
Congratulations on your beginning the transition.

I can't answer your second question, but I would guess the CPA you use for your LLC can give you the best advice.

Regarding health insurance, the heathinsurance.gov is a market place that lists all carriers in one place for your state. You can go it alone to try and find a carrier, or use the marketplace (or an independent insurance agent). You are correct you won't get the subsidy, but your taxes paid for the sight, so IMO -- use it!

If you will be working for several more years and have the cash flow to support the out of pocket expenses from your new health plan, an HSA would be very worthwhile. Just like the SEP or Solo401K, you are sheltering income. There are many HSA providers out there, I use HSABank as they have the lowest administrative fees (i.e., no monthly charge for the account after a minimum deposit is made).

-- Rita

 

[sheehs1]

AIMHIgh, I don't qualify for a subsidy and I did not use healthcare.gov, primarily because I saw no benefit in doing so. I did compare prices offered on healthcare.gov to the private, individual off market prices and found them pretty much the same in the state of Virginia. Every state could be different so it pays to do your research.

I analyzed the cost and benefits of each plan offered by Anthem in my state. I also looked at other insurers (Humana, Optima, etc.). I chose to stay with Anthem. I have been with them since college and they had never let me down ….yet!

It boiled down to (1) you either pay up front for some office visits and tier one drugs or (2) you pay if you need it. I chose the bronze plan as it "looked" to be cheaper for me than the Silver, Gold or Platinum, considering everything goes towards the high deductible including drug cost.

It took some mental gymnastics for me to get over the fact that if I have to go to the doctor, I will be paying more than a copay. I will be paying the allowable charge as long as I stay "in network". It is also different for me having to deal with a network as I have been able to go to any doctor I wanted…until now..unless going forward I choose a POS plan, But the cost of that was over double the premium of the bronze plan.

If it doesn't work out, I can always switch next year. In other words, it is not a decision carved in stone.

I chose a plan with an HSA. The tax savings helped a bit, sheltering that money from taxation, in affect reducing my cost a bit more.

That said, I am not on any medication and do not have a medical condition (yet!) Those are factors one should consider.

Can't answer your second question.