Finding Insurance: A Beginner’s Guide for the Self-Employed
By Wendy Lynn
A big concern many people have when debating leaving a job and becoming self-employed is health insurance. Knowing you have different options to keep your family from financial ruin, should there be a medical emergency, may help you decide to take a risk and go for your dream.
When you look over the following options, keep in mind how much your current insurance costs you. Even if your employer pays the full amount for your policy, it is part of your compensation; if you did not have it you would be able to have a larger salary. Chances are you are paying at least part of the premium, with it being deducted from your paycheck.
If you currently have insurance through your employer, you have the option of keeping the policy for up to 18 months after leaving your job. You will be responsible for the whole premium, and it will be costly, but it will give you a chance to look into other options for coverage as you start your own business. This can be crucial if someone in your family has a medical condition that could be labeled as a pre-existing condition when applying for another plan.
Spouse Has Insurance Through Work
Many double income families have the possibility of health coverage through both the husband and the wife. In most cases, they have insurance with only one company. If the insurance is through your employer and you are the one that wants to quit, find out how to get insurance with your spouse’s employer. There may be certain time frames for applying, but there is almost always at least one per calendar year. Keeping your COBRA insurance active until the new insurance can start is the best option for the lapse time in this situation.
There are a few different insurance plans through the state. You and your family may be eligible for state funded insurance while your business gets started. Many states have a program for children you may be eligible for so you would only have to worry about paying for insurance for yourself and your spouse. If you are having finding insurance due to pre-existing conditions, find out if your state has a high-risk pool or a guaranteed coverage policy. These programs can be very helpful when regular companies will not issue you a policy based on health conditions.
Insurance Through Professional Associations
Contact the Small Business Association in your city to find out if they have an insurance program for the self-employed. If your business has some type of professional group, check with them as well. Many times these associations have some type of group policy you can purchase with them. You will have to pay the full premium, but due to the large number of people on the plan the rates are considerably lower than buying a plan on your own.
If the only way to get coverage is through a regular insurance company, make sure you work with an insurance broker that has license to sell insurance for a number of different companies. Many times they have a way to put you into a group plan even if you are only buying insurance for your family.
Health Savings Account
Many people have a health savings account (HSA) that is a savings account you start and can add money to that is only used for medical expenses. Any expense you pay is completely tax deductible. In order to qualify for one of these accounts, you must have proof of a high deductible health plan (HDHP) in effect with a licensed insurance company. The HDHP does not have the high premiums because your deductible is anywhere from $2,000 on up; the higher the deductible the lower the premium. You then open the HSA and use the money to pay for doctor visits, prescriptions and the like until you reach your deductible. The accounts are interest bearing and tax exempt.
Temporary Insurance Plans
Some companies offer short term insurance plans that are not as expensive as a regular plan. If you know you will be getting insurance from another source within the next 6 months, this could be a good option. If you need to have coverage for a longer period, you will have to get a new policy when your current one expires. This is not an extension; it is a whole new policy. If you have a health condition crop up that will need treatment after your policy expires, you may not be able to purchase a new policy.
Health Discount Clubs
These clubs are very inexpensive, usually under $30 a month for the whole family, and offer discounts on almost every medical expense. This could be used in conjunction with a plan that is for catastrophic situations only.
It is important to understand that no matter what you decide on regarding your health coverage, you need to be involved in setting the parameters of the policy. Do not pay for coverage you know you will never need, such as maternity coverage if you are a male or a female past child-bearing age. Before you buy any type of policy, check out the issuing company with the Consumer Information Source and the Better business Bureau. Know what others are saying about the company you are going to be doing business with and if there are many complaints against them. Information is your best friend when it comes to buying insurance of any type.
Wendy Lynn is a freelance writer investigating health insurance for her family as she writes about following a low carb diet.