One of the biggest problems of starting or having your own business often has nothing to do with business at all. It’s getting health insurance coverage, or more specifically, getting it at a price you can afford.
If you’re young and healthy, getting health insurance is usually not a problem. Premiums aren’t terribly expensive, and nearly any health insurance provider would be glad to add you as a client. But if you’re middle age or older, or have any health problems—no matter how minor—getting and keeping coverage can be a serious problem. Sometimes it’s not even a matter of cost, but whether or not you can get insurance at all.
If you’re self-employed this can be a serious problem. Employer group plans will insure you regardless of your age or the condition of your health. And since premiums are level and spread out over all members of the group, the cost of your coverage will be no greater than it will be for any other members. This is even more true if the employer pays part or most of the cost of the premium.
What do you do about health insurance if you’re self-employed?
1) Trade groups and membership programs
Some industry and trade groups offer some sort of health insurance programs to their members that may be worth checking out. As a catch all for the self-employed, the National Association for the Self-Employed, or NASE, offers its members “access to healthcare”.
If there are no industry associations or trade groups for your type of business, you can check out AAA. My wife and I have been AAA members for several years, and though we have not looked into their health insurance offerings, we more than recover our annual fee in the form of benefits and discounts each year. If you’re over 50, you can also look into AARP. They offer health insurance plans for people between the ages of 50 and 64.
Based on what I’ve been able to determine, none of these associations actually offer health insurance directly, but rather they partner with major carriers. They probably offer some sort of premium discount (not disclosed on their websites) for members that could be well worth the effort.
2) Coverage through your spouse’s employment
With the cost of living today, and especially the cost of health insurance, it makes sense to take something like a tag team approach to earning a living. One spouse can hold a steady job that offers a full benefits package, providing a measure of stability for the couple, while the other tries to maximize income through self-employment.
For many couples this arrangement works well. One spouse has a higher security drive and prefers working at a job with steady hours and a regular, predictable income. The other is more comfortable taking risks and going for the big money. It’s also often true that one spouse has better employment skills, while the other has talents that lend themselves more to self-employment.
Just as important, this is also a form of income diversification. When it comes to investment diversification, the goal is to seek “mutually exclusive” investments—spreading your portfolio between certain investments that perform well when other holdings don’t. One spouse holding a job can offset a slow period for the self-employed spouse and, alternatively, the self-employed spouse could provide breathing room to the employed spouse in the event of a job loss.
In any event, health insurance is sufficiently important (and expensive) to justify one spouse holding a job in order to provide it for the household.
3) Holding a job just for health insurance purposes
If you aren’t married or if your spouse has no access to health insurance either, it might be worth if for you to take a job specifically to get coverage. This is an especially good idea if you’re early on in your business venture and can run it as a side business.
There are at least three ways you can handle this:
- If you have a full time job and are just starting your business, hold onto your job until your business earns enough money that you can afford a health insurance plan
- Take a relatively easy job that offers health insurance coverage—my recommendation is to become a security. It’s easy work, and often offers health insurance.
- There are part-time jobs that offer health insurance. The level of coverage varies from employer to employer, and may lack generous employer contributions, but they can be especially valuable if age or medical conditions are preventing you from getting private coverage.
4) Catastrophic health insurance
If all else fails, go for catastrophic coverage. People balk at catastrophic plans because they don’t cover anywhere near what more comprehensive plans do, but they do offer two tangible benefits that you can’t afford to be without:
- They will cover large medical bills—medical disasters—and that will enable you to get the treatment you need, when you need it, and without fear of losing all of your assets in the process, and
- It will put you into a provider network, and the discounts that that membership will provide will cut the cost of health procedures well below what you will pay if you had no insurance at all.
The self-employed are perhaps the most impaired career class in the country when it comes to health insurance. Will the healthcare reform bill (PPACA) fix that? Maybe, maybe not. But the main provisions of the new law don’t take effect until January 1, 2014, and not only do we have to muddle through between now and then, but there’s no way to anticipate what changes may come into the picture between now and then, or even after the fact.
In the meantime, we have to do the best we can with what we have now, and hopefully this will give you some solid options to choose from.
If you’re self-employed, what are you doing about your health insurance?