Sole proprietors, partners, LLC members, and S corporation employee-owners can deduct qualified health insurance premiums paid to cover themselves and family members. In order to qualify, the owner must own over 2% of the stock in the business. The health insurance costs can be deducted on a 1040 "above the line" meaning that the deduction can be taken whether or not you itemize. ("The line" refers to the last line on the first page of the 1040 which indicates your adjusted gross income).
Medicare Part B premiums have not been a deductable qualified health insurance premium for the self-employed. Small business owners who were enrolled in Part B Medicare were unable to deduct from between about $1,100 to $4,500 a year (the amount paid depends on the income level of the Medicare beneficiary). However the IRS recently reversed itself on the Medicare Part B premium deductability, as the 2010 instructions explicitly Medicare Part B premiums to be included in health insurance costs for the deduction.
A person can also deduct self-employed health insurance premiums from self-employment income when calculating self-employment taxes in 2010. Review these rules for 2011 returns, as they may expire after 2010.