Health insurance coverage has become a national concern, but no where is the issue quite as close to home as it if for the self-employed. An employee may be concerned with the size of his premium contribution, or with co-pays and deductibles. Self-employed health insurance carries those concerns and more. Like how to pay a premium that’s the size of a house payment but isn’t subsidized by an employer. Or even whether or not he can get any coverage at all.
There’s a lot of debate on health care, but we should expect no true reform and certainly no salvation in the foreseeable future, including the Afordable Care Act (aka, Obamacare). Reform centers on how to maintain funding mechanisms to support the current over-priced system, or to trim “administrative costs” at the fringes. It doesn’t get to the core of the issue, which is that the efforts at greater funding have lead to a system of perpetually higher costs.At some point, the healthcare system will blow up — a la the mortgage meltdown — and then perhaps a crisis will break the cost spiral in a way that decades of putting tape and glue on the status quo couldn’t. In the meantime, what do you do to deal with what has become for the self-employed, an almost malicious system?
The first line of defense on self-employed health insurance — take care of your health
When we get busy in life there’s a tendency to let a few things slide; taking care of our health is often one of the first ones to go. This can be especially prevalent during the start up of a new business, or during economic downturns when just keeping a business going becomes a 24/7 effort.
While this is understandable, it can turn out to be a strategic mistake of the highest order. Health lost can be health lost forever. That dilemma poses special problems when it comes to self-employed health insurance.
If you’re covered by an employer group plan, the plan must accept you regardless of any health conditions you have — you’re in the plan by virtue of the fact that you’re in the group, which is your employer’s company. Even better, your premiums will be no higher than anyone else in the group. By contrast, when you’re self-employed and relying on private coverage, negative health conditions can result in any one of the following outcomes:
- Paying higher premiums
- Having certain health conditions excluded from coverage
- Denial of new coverage or termination of existing coverage
(Note: The Affordable Care Act promises to remedy these issues, but we’ll have to see how it plays out.)
If you’re self-employed, your health should be thought of as a long term investment. You need good health in order to operate and grow your business, but you also need it to get and keep health insurance coverage. No matter how busy you are in your work, conscious thought needs to go into eating better, eliminating bad health habits (smoking, excess alcohol consumption, and dangerous activities) and time needs to be allocated for regular physical activity.
Catastrophic coverage is health insurance with high deductibles and it can be a godsend if you rely on a private plan, as many self-employed people must. The deductibles can be set at $5,000, $10,000 or even higher.
Many people recoil at the idea that benefits won’t kick in until such high thresholds are reached, but the savings from doing so can more than offset the cost of routine procedures and treatments.
With the rolling out of the Affordable Care Act, health insurance rates right now may be less than reliable. But it’s safe to say that increasing your deductible from say, $2,000 per year to $10,000 under a catastrophic plan will save you hundreds of dollars per month.
Now it’s true that you will be on the hook for a higher amount in the event of a major medical event, but it could be the difference between having affordable health insurance coverage and none at all. With the cost of healthcare today, a single major medical event can cost hundreds of thousands of dollars and force you into bankruptcy. Catastrophic coverage may not be perfect, but it will prevent that outcome, and give you more treatment options as well.
Here are some other points to keep in mind when buying health insurance:
- If you’re in good health and don’t go to the doctor more than once or twice a year, you probably don’t need coverage for doctor visits; a co-pay might limit what you pay for a visit, but since the visit is probably only around $150 total, you’ll be increasing your monthly premium substantially for what amounts to a benefit of only around $100 per visit.
- If you aren’t on any ongoing drug therapies, you probably don’t need prescription coverage either. Prescription coverage increases monthly premiums considerably, and if you only have need for an occasional antibiotic, you’re paying for a benefit you aren’t getting. Many health plans will allow you to add prescription coverage later if need be.
- An emergency fund can offset a high deductible. If you have $10,000 or more sitting in a savings account for emergencies, you have room to increase your insurance deductible to $10,000. Bank the money that you save from the higher deductible to cover other emergencies.
Self-employed health insurance has to be different from what it is for salaried people, but if you’re in business for yourself, you already know that being different is virtually a way of life.
Low cost health care options
OK, save a bunch of money with catastrophic coverage to handle medical disasters and we’re on our own for the little stuff. But there are a few things that can be done to control those as well.
Doctor visits. If you don’t have doctor visit coverage under your insurance plan, take advantage of the clinics at chain pharmacies. Not only are they much cheaper than formal doctor visits, but you can walk in, the wait — if there is one — is usually short, and they’re open more hours. They’re staffed by nurse practitioners who can handle the routine matters that usually bring us to the doctor.
My wife went to one of the Walgreen clinics for what turned out to be an ear infection. It was $45 for the visit, and an inexpensive anti-biotic cleared up the problem in a few days. Under our current plan, we would have paid a $40 co-pay at a regular doctor’s office. Translation: she got primary treatment at a Walgreen’s clinic for roughly the cost of a co-pay.
Prescriptions. If you don’t have prescription coverage, ask the pharmacist for an over-the-counter equivalent. Most prescription drugs are prescription only for a few years, then they’re converted to over-the-counter. Prilosec and Prevacid (digestive ailments) are two such examples and I can tell you from experience that Prilosec gets the job done.
Many large retailers like Sam’s and Kroger offer common prescriptions at very low prices, like $4 for a 30 day supply. You can sometimes get volume discounts on more expensive prescriptions that can add up to substantial savings over the course of a year.
Also, be sure to tell your doctor that you don’t have prescription coverage and ask for a lower cost treatment. And don’t be afraid to ask for free samples — they often have them.
Keep a job just for heath insurance
If you have health conditions that make it either impossible to get a plan, or that require you to take a higher level of insurance coverage than you can afford, you still have a couple of options. The most obvious – if you’re married — is for your spouse to hold a job with health insurance.
With the extinction of job security however, it pays to think strategically. The coverage should be the least expensive possible, and as close to catastrophic coverage as you can get. That way if the job is lost you may still be able to afford to continue under COBRA. That will buy you an extra 18 months of coverage in the event the job is lost.
Still another option is to get a get a part time job with health insurance coverage, and they ARE out there. Target, Home Depot, UPS and some of the major department stores, grocery stores and banks offer this coverage. So does Starbucks — and they have a store in nearly every community in the world.
Yet another way to be able to afford health insurance is to create a dedicated income stream to cover the cost of your health insurance. If you’re interested in this approach, check out my post The Freelance Blog Writer Side Hustle. This is a business that’s easy to enter and can blend very well with what ever business or job you have now. And once you get it up and running, you can use the income to cover your health insurance premiums, without disturbing your regular business cash flow.
If you’re self-employed, or working for an employer who doesn’t offer health insurance, what are you doing to get health insurance coverage?