Health Insurance and Coverage Options for the Self Employed

Submitted by admin on Mon, 01/05/2009 - 19:39

Dying for Better Health Care Options

By Christopher J. Bachler

When I “hired myself” in 1983, I took out a health policy through the Chamber of Commerce. I was 28 and my plan cost $45 per month, plus $250 in annual Chamber dues.

The years passed, and those rates climbed into the stratosphere! The breaking point came last year when my monthly rate jumped from $432 to $658! With Chamber dues reaching $750 per year, my total monthly costs would be $720 per month, just for myself!

Problem & Solution
The causes of the health insurance problem would fill a tome. Suffice it to say that ballooning costs will be with us for years to come, no matter what quick fixes politicians might promise.
President Bush’s signing of the Health Opportunity Patient Empowerment Act of 2006 offers some relief by making Health Savings Accounts (HSAs) more flexible, and by providing tax incentives for those who invest in them. (See www.whitehouse.gov/infocus/healthcare). Also encouraging is the Administration’s tax relief plan by which family buyers of health insurance would pay no tax on their first $15,000 of income. Individual buyers would be exempt on the first $7,500.

First Options
Your options depend on your individual circumstances. If your spouse is gainfully employed, you might obtain coverage through his or her plan. Given the trend for employers to ease away from the escalating costs of these plans, however, those benefits might not last.
If you’re about to leave a full-time job through which you have health coverage, you might be eligible for coverage extension under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA). This option applies to group plans provided by employers with 20 employees or more. (For details, see www.pueblo.gsa.gov/cic_text/employ/cobra/cobra.htm).
Even if you’re not eligible under COBRA, you might persuade your former employer to allow you to continue under the plan until you get other coverage. Yes, people actually do this! Expect to pay for the privilege, however.

Assessing Your Options
Begin by assessing your needs. How much coverage do you really need? What is your age and state of health? How many out-of-pocket costs can you manage? The higher your deductibles, the lower your premiums will be. In most cases, that’s a prudent choice.
If you want a group plan — which usually offers more comprehensive benefits — you’ll need to join an organization that offers such benefits. Fortunately, many organizations do these days, such as:
• Local Chamber of Commerce
• Professional associations
• University alumni associations
• Automobile clubs
• Membership organizations

If you belong to an organization, start there. If not, investigate those you’d like to join, and see what benefits they offer. You can usually find that information online.
In some cases, you might not be eligible for enrollment as an individual, but might gain access if you join with one or more employees or partners.

Individual Plans
A group plan might not be an option. Or your current plan might be too expensive to continue. If so, you’ll want to shop for individual options.
Blue Cross/ Blue Shield (BCBS) (http://www.bcbs.com/) dominates most markets, and is often regarded as an insurer of last resort. Aetna (www.aetna.com) is another popular option that offers a wide variety of cafeteria plans for fairly reasonable costs. But unless you’re in pretty good health, you might be rejected. It’s still worth a try!
Plans and rates for these top producers span a virtual universe, with newer options appearing all the time. How much you pay depends on your priorities.
For example, a 53-year-old male subscriber in one part of Chicago might obtain the following two options from Blue Cross (without dental):

Blue Choice Value Including Maternity
Lifetime Benefit: $5,000,000
Individual Out-of-Pocket Expense Limit: $3,000
Depending on deductible and out-of-pocket options, monthly premiums can range from $140.68 to $310.26.

Blue Value Including Maternity
Lifetime Benefit: $5,000,000
Individual Out-of-Pocket Expense Limit: $1,000
Depending on deductible and out-of-pocket options, monthly premiums can range from $227 to $522.

The same individual seeking an Aetna plan in the same location will also find a universe of options, such as the following two PPO plans as examples:

IL - PPO 1500
Individual deductible = $1,500
Coinsurance responsibility = 20% in network, and 50% out of network
Various service co-pays, including prescriptions
Rate = $434.00 / month

IL - PPO 500
Individual deductible = $1,000
Coinsurance responsibility = 20% in network, and 50% out
Various service co-pays, including prescriptions
Rate = $607.00 / month

** The above examples include deductibles and various co-pays.

Understand that these represent only four of numerous examples, and might not apply to any given subscriber. (Online figures estimates, not final guarantees). There are countless options available, depending on your location, age, and how many bells and whistles you opt for. So rather than take these examples at face value, visit the web sites, and sort through the universe of options for yourself!
Exhausting these possibilities, it might be worth trying insurers with which you carry other coverage. An influential agent might be able to help you.
Some states offer low-cost insurance options of last resort for qualifying residents. Pennsylvania, for instance, offers such a plan, called adultBasic. For details on such programs, visit your state government web site (www.montana.gov, for example), or gain access through the main federal portal at usa.gov.
The important thing to remember is that insurance shopping is a never-ending process. Though you might have decent coverage for now, there might be better options elsewhere. So keep looking!

Get Quotes Online!
The Internet makes the search much easier than in days past. Not only can you find virtually every option available, but you can even get quotes within a day or two. Examples include:
• eHealthInsurance.com
• www.nationalbusiness.org
• http://www.smallbusinesshealthinsurance.com/
• www.bcbs.com
• www.aetna.com

Benefits of Incorporating?
Incorporating your business may or may not be wise for many reasons. But can it help with your insurance needs? As far as getting acceptance, it could in some cases. But you’ll only know through trial and error.
One likely advantage would be at tax time, when, as a corporate entity, you should be able to deduct your insurance costs as a business expense. As a sole proprietor, you can only deduct a portion of it from your personal income taxes. Taken as a business expense, it will reduce your Social Security taxes, as well as your federal tax. But before taking this step, consult the IRS (www.irs.gov), as well as your attorney and tax specialist.

Wave of the Future?
HSAs and Medical Savings Accounts (MSAs) are gaining widespread appeal, especially in the wake of the President’s enthusiastic support.
“An HSA is ideal for everyone,” says Brian A. Miskovitz, Executive Vice President & CFO of First HAS, LLC (www.firstmsa.com ), based in Reading, PA. “They combine a high deductible health plan with a tax-free savings account. Because MSAs are more restrictive about contribution levels and participants, they’ve been largely replaced by HSAs.”
Miskovitz clarifies the strategy. “The idea is to purchase a higher deductible health plan which significantly reduces your premium. The premium savings is contributed to the HSA tax-free savings account. Since the HSA contribution is 100% tax deductible, account-holders benefit by using pre-tax dollars to pay for medical expenses. The money in the account is yours, rolls over annually, and earns tax-free interest that can be used to pay for future medical expenses or to supplement income at retirement. Once your deductible is satisfied, the insurance company pays the rest of your medical expenses.”

Tips
• Do you really need “Cadillac coverage?” The purpose of insurance is to protect you from catastrophic loss, not to pay for every nickel.
• Go for high deductibles. It generally pays.
• Keep copies of forms you’ve filled out and other medical records.
• Keep shopping — even after you’re covered. Things change, and you might find better deals.
• Group plans are usually best, but not always cheapest.

Stay Healthy! That’s Your Best Insurance!!!

If you’re still interested, I switched to a Blue Cross Personal Choice plan with higher deductibles, for a monthly premium of $376.00. After one year, it was boosted to $450. See you on the shopping circuit! HBM

HBM Sidebar:

Helpful Resources

There are lots of helpful resources are at your disposal. Try these:

Federal Government

• USA.gov
• SBA.gov
• IRS.gov
• Agency for Healthcare Research and Quality - http://www.ahrq.gov/consumer/insuranc.htm
• US Treasury – Health Savings Accounts - http://www.treas.gov/offices/public-affairs/hsa/

State

Your state insurance department can provide lots of useful information about the laws in your state and information about where you might find coverage. Access them through your state’s web site (www.idaho.gov, for example), or through the federal portal at usa.gov.

For information on finding HSA providers in your state, see:
• http://www.greatlakeshsa.com/hsaproviders.html
• http://www.msainfo.net/
• http://www.greatlakeshsa.com/hsaproviders.html
• http://www.msainfo.net/
• www.firstmsa.com

For information on forming a corporation, see:
• http://www.bizfilings.com/
• http://www.legalzoom.com/law_library/corporations/forming.html
• http://www.corporate.com/c-corporation.jsp

Private Associations

Many business associations offer insurance plans and other support. Some, such as the National Small Business Association (www.nsba.biz), are also promoting plans for reform, and can use all the allies they can muster.

Here are some:
• National Association for the Self-Employed - www.nase.org
• National Business Association - www.nationalbusiness.org
• NSBA- National Small Business Association, Inc. - www.nsba.net
• U.S. Chamber of Commerce - www.uschamber.com

Christopher J. Bachler is a 20+-year veteran business writer and editor, based in Drexel Hill, PA.