With the NHS being severely under funded, more and more people are turning to private medical care in order to get the treatment they need. This might be treatment that can be done for free on the NHS, or elective and cosmetic surgery that you have to pay for. Whatever medical treatment you need, you should consider getting a loan for medical treatment if you cannot afford the costs. Here is some advice about taking out loans for medical treatment.
What is medical financing?
Medical financing is a method of paying for elective treatment through a loan. This loan is similar to any unsecured loan, except that it is designed specifically for medical treatments. Many people have the choice between getting a loan for elective treatment or not having it at all, so this type of loan can really help out.
Better than a credit card
Although smaller procedures might be afforded on a credit card, medical loans have a major advantage over credit cards. Cards have much higher interest rates than a loan, and so it will cost you more and take you longer to pay back. Also, after surgery you might not be able to work for a while, and that credit card could be useful for expenses during this time.
Types of procedures
Medical financing can be used for all manner of procedures, both elective and non-elective. If you find yourself in a long NHS waiting list and are eager to have an operation but don't have medical insurance, then a medical loan could help you get the operation privately. Also, if you want treatment that your medical insurance or NHS will not cover, such as cosmetic surgery, then a loan can also help.
Not all doctors accept financing
Although medical financing is widely accepted, not all doctors will accept this method of payment. That is because doctors negotiate with lenders in order to offer a discounted rate for procedures. Therefore, the doctor will not get the full amount for the operation. Some doctors cannot afford or do not wish to do this, and so do not accept this type of medical financing.
Alternatives to medical loans
Of course, there are alternatives to medical loans. You could get a traditional secured or unsecured loan to pay for your treatment. If you can find a loan with a better rate than medical financing, then it might be a good idea. However, it might not have the advantages or convenience of a medical loan, like not making you start to repay the loan until after your recovery period. Whatever type of loan you choose, make sure that the procedure you are paying for is what you really want, and that you can afford to make the repayments. Also, make sure that the hospital and doctor you use are of a high standard and have all the necessary qualifications to carry out your operation. That way you will keep your health and your financial status intact.
If you are self-employed, your income is subject to a 15.3% self-employment FICA tax. Added to a 28% Federal income tax and a 5% state income tax, this could leave you paying nearly 50% of your income to the government. Fortunately, most self-employed people qualify to set up an HRA or Health Reimbursement Arrangement. An HRA can enable your business to reimburse you for health insurance and out-of-pocket medical expenses, and will save you an extra $3,000 each year.
Health Reimbursement Arrangements for the Self-Employed
An HRA is simply an agreement which enables your business to cover employee's medical expenses, including individual health insurance premiums, as a tax-free fringe benefit. This tax benefit was established in Section 105 of the IRS tax code in 1955, when General Electric lobbied for a business reimbursement rule to give it more flexibility in creating employee benefits.
Anyone set up as an S-corp or C-corp qualifies to set up an Health Reimbursement Arrangement. If you are a Schedule C or Schedule F sole proprietor, an HRA is allowed if your spouse can work at least part time in the business. You will be setting up an employee benefits package that covers health insurance premiums, disability insurance premiums, long-term care premiums, and even out-of-pocket medical expenses such as dental coverage.
A Health Reimbursement Arrangement makes your taxes go down because when you get to write off medical expenses on your Schedule C, you avoid paying Federal income taxes, state income taxes, and the 15.3% FICA self-employment tax. Not only can the business reimburse you for the cost of health insurance premiums, but you can also set up the HRA to reimburse for dental coverage, preventive care, disability insurance, long-term care insurance, and other out-of-pocket medical expenses.
If you are self-employed but do not have an HRA, you can write off your health insurance premiums on your 1040, saving you Federal income taxes. But, you are still subject to all income taxes for these expenses. You are not able to write off any of the other expenses listed above.
Using an HRA with a Health Savings Account
Some financial advisors do not realize that you can have an HRA along with a Health Savings Account (HSA). You can of course. The only caveat is that the HRA cannot reimburse for expenses that could apply toward the deductible of the HSA, such as doctor visits or prescription drugs. But, it can cover any insurance premiums and preventive care.
The potential savings are tremendous. Let's assume a business owner is in a 28% tax bracket, has an HSA plan, and is incurring the following expenses.
Health insurance premiums - $7,000, preventive expenses - $1,000, other insurance - $2,000
The self-employed business owner can write off the $7,000 premium on Federal income taxes, saving 28% of that or $1,960. If the HSA is fully funded, an additional $1,582 will be saved off of Federal income taxes and $282.50 from state income taxes. So, in total, the business owner's taxes will go down by $3,824.50.
Once an HRA is set up, the entire $10,000 in expenses listed above can be reimbursed by the business. So, the business owner would be saving a total of $2,800 from Federal income taxes, $500 from state income taxes, and $1,530 in self-employment taxes. The business owner will also get to take advantage of the same $1,960 in Health Savings Account tax savings, for a total tax reduction of $6,790.
Smart business owners take advantage of all the tax deductions for which they qualify. You can reimburse health insurance expenses from the beginning of the year, but out-of-pocket expenses only from the date your HRA begins.
Both Peter J Kenny & Wiley Long are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Peter J Kenny has sinced written about articles on various topics from Credit Cards, Finances and Banking. Peter Kenny is a writer for The Thrifty Scot Please visit us at and