This is a question that comes up often with health care sharing plans like AlieraCare.
Let's walk through this question and figure out how to incorporate the answer in our cost calculation.
This definitely affects the real cost when comparing health sharing and ACA health plans.
We'll walk through an example below.
These are the topics we'll cover:
You can quote health sharing plans here:
Let's get into it.
This is primarily a question for self-employed people with income outside of w2.
Meaning...if you have a loss, you can't get a credit or refund for the health insurance premium piece.
This deduction also applies to health insurance premium for dependents on the same 1040 tax form.
This deduction for self-employed health insurance has always been a strong selling point for getting coverage.
If you get a tax credit through the exchange, you only write the part that you pay.
Your out-of-pocket for that year's self-employed health insurance.
Get more guidance on the self employed health insurance tax deduction here.
Learn all about health care sharing plans are different from ACA health plans.
So...what about health care sharing ministry plans like AlieraCare?
There are rumblings in Congress but currently, you cannot write off payments towards health care sharing plans like AlieraCare.
This applies to self-employed people as well just to be clear.
Technically, the IRS rules states that it must be qualified health insurance and health care sharing plans are not insurance.
They are memberships where members "share" healthcare expenses via a health care sharing ministry.
You can learn all about this here:
For our discussion, you can't deduct payments made to healthcare sharing plans.
Why does this matter?
If you're self employed (most likely if asking this question), then you know the power of before and after-tax dollars.
The two biggest reasons people choose healthcare sharing plans like AlieraCare are:
As for the latter, some states banned short term health insurance and Aliera short term may be the only option.
The tax deduction affects the first piece...cost.
After tax cost.
On top of that State and Local taxes also share in this deduction.
That probably puts you closer to 30% in a high State tax area like California.
That being said, many self-employed individuals now have the 20% deduction which is an offset.
So...the net reduction in real, after-tax dollars is probably close to 20-30% for this self-employed deduction.
You can quote AlieraCare health sharing plans here:
You can quote ACA health insurance plans here:
Let's now compare examples of how this might work versus health sharing plans.
Let's look at actual examples.
Again, these apply to self-employed people since they are potentially eligible for the tax credit.
Let's assume the following:
The difference is $250 month between the two.
Albeit, there are big differences in terms of what they cover as health sharing plans are more catastrophic-designed plans on average.
Check out ACA health plans versus health sharing plans for more detail.
Let's figure in the tax deduction piece now.
IF you're self employed with positive business income, you may deduct 100% of the $500.
If we assume a tax bracket of 20%, that's roughly $100 in real after tax savings.
This is just an example but you can look at your particular situation with the following.
You can check out all the rates including their more catastrophic CarePlus plans here:
Run your ACA health quote here:
Check general tax bracket from 2018 or latest filing (includes the new 20% deduction for many self-employed people).
Of course, we're happy to help with any questions either way!
Please let us know if any questions come up.
It's new to many people so we're happy to walk through any questions!
Make sure to learn about the differences between health sharing plans and Obamacare.
We're happy to help with any questions.
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