Whether it is affordable, of course, is a crapshoot. That depends on a
myriad of factors–where you live, the ages and the health of who is
being covered, and the type of policy you need, among other things.
Today, an estimated 42 million people — about a third of the American
work force– are technically their own boss. I’m one of them. We’re
self-employed freelancers and independent contractors. Some workers who
fall into this cadre are temps or part-timers. Some have already
officially “retired” and are continuing to work a reduced schedule, or
have accepted an early retirement package, then launched an
entrepreneurial enterprise.
Regardless of the job title, the problem is the same: Finding health
insurance. More American adults lacked health insurance coverage last
year than in any year since Gallup and Healthways started tracking it in
2008. The uninsured rate has been increasing since 2008, climbing to
17.1% in 2011.
For loads of people I’ve interviewed and met over the past several
years, it’s a roadblock. They gamely talk the talk of following their
passion and finding their dream job, or starting their own business, but
the thought of losing health benefits stops them cold. It’s a huge
hurdle when you consider that starting over in new field will generally
require a pay cut, at least initially.
When clients come in for financial planning advice before they make a
leap to self-employment, they’re shell-shocked to discover their new
health insurance premiums might clock in at $600 or more a month, says
Greg Bitz, a fee-only certified financial planner with Metropolitan
Financial Group in Chevy Chase, MD. “For some, that’s quadruple what
they had been shelling out via their employer-sponsored plan.” That can
require serious budget revamping, and Bitz usually reviews their
possible policies before they sign on for coverage to be sure they know
what they’re getting.
For countless self-employed workers, though, health insurance is
simply not within their means. Help is on the way. The Affordable Care
Act, now the the 2010 health-care reform law, is intended to tackle
this problem beginning in 2014. That’s when if you’re under 65, you will
be able to purchase health insurance through state insurance exchanges,
with tax credits for those with low and moderate incomes. And if you
have a pre-existing condition, you’ll be able to land a policy.
For now, here’s one piece of good news. If you’re self-employed and
pay health insurance premiums, you can deduct 100% of the cost from your
income when calculating your federal income taxes. The deduction is not
subject to the 7.5% AGI limitation that other medical expenses are.
Here are eight ways to land self-employed health insurance in 2012:
Ex-employer’s plan.
If you’re retiring, count your lucky stars if this is an option. Most workers don’t have it. One of the biggest hurdles is figuring out how to pay for health insurance until 65 — the magical age when Medicare kicks in. Medicare will cover the majority, but not all, health care costs. Among large firms (200 or more workers) about one in four offered retiree health benefits in 2011, down significantly from 32% in 2007, and a far cry from the whopping 66% who offered retirees health bennies in 1988, according to the Kaiser Family Foundation/Health Research & Educational Trust survey. And only 6 percent of small firms offered retiree health benefits last year.
Some companies let retired workers buy health insurance through the
company plan. They might even subsidize a portion of the premiums. If
not, it can be pricey. A Towers Watson survey of 552 of the nation’s
largest employers found that retirees under age 65 pay an average of
$633 per month for individual coverage and $1,633 monthly for family
coverage. Current employees with similar coverage were paying $432 and
$1,249, respectively. Moreover, most companies hold the right to alter
or cancel the coverage at any time.
A spouse’s plan.
Some freelancers, like me, are
fortunate enough to have an insured partner with an employer who offers
family coverage. Thanks, Time-Warner! Your spouse will pay a higher
premium for family coverage, but it will still be less than an
individual policy. Annual premiums for employer-sponsored family health
coverage increased to $15,073 ($5,429 for single coverage) last year, up
9% from 2010, according to the Kaiser Family Foundation/Health Research
& Educational Trust. On average, workers pay $4,129 and employers
pay $10,944 toward those annual premiums. Some plans won’t let
participants add a relative until open enrollment season, typically in
November or December. Try to delay your retirement or resigning until
you can be added on.
COBRA. Under the Consolidated Omnibus Budget
Reconciliation Act, employers are required by federal law to offer COBRA
carry-over health and dental coverage for up to 18 months for you and
your dependents when you leave your job. The upside is you don’t have to
be concerned about preexisting conditions being covered. But it’s
expensive. The entire cost of the insurance comes out of your own
pocket, plus a 2% administrative fee. Ouch. If you have time before you
leave your job, switch to the least expensive health plan during the
open enrollment period near your departure date. That way you will have
lower premiums when you’re picking up the tab. For more information
about COBRA coverage, go to the U.S. Department of Labor.
Join a professional group.
Some professional and
trade groups, such as a bar association, your church or alumni
associations offer health insurance with group coverage rates. Other
possibilities: If you’re over 50, AARP.org, is worth exploring. Or
research what’s available through a special interest group you’re a
member. If you are running a small business, you might check with your
local Chamber of Commerce, the Small Business Service Bureau (sbsb.com). In addition, The National Association for the Self-Employed (NASE.org) offers insurance plans. If you live in New York State, for example, The Freelancers Union
offers insurance through the Freelancers Insurance Company (F.I.C.). It
currently covers about 25,000 independent workers and their family
members and offers premiums that are reportedly a third below market
rates. Individual plans might run from $225 to $600 per month.
Purchase your own policy.
One option for
self-employed folks who are in decent health is to sign-up for policies
with low premiums and high deductibles, opting for insurance that kicks
in for catastrophic illness. You can compare a variety of insurance
options in your area at healthcare.gov.
Individual policies can be expensive, particularly if you’re 55 or
older. Expect a deductible of $1,000, $2,500 or even $5,000 in order to
keep the premium within budget. Premiums vary broadly based on your age
and physical condition.
Other online sources to check for availability and get an idea of
costs by comparing dozens of health insurance plans that are available
in your area include: eHealthInsurance.com, einsurance.com and GoHealthinsurance.com and Insure.com. The National Association of Health Underwriters website www.nahu.org, can direct you to a local health insurance agent if you prefer to have someone else do your homework. Check with your state insurance commissioner’s office
to find out if any complaints have been filed against the agents or the
insurers they represent. You can also go directly to the insurer sites
for quotes.
Options to consider: premiums, deductibles, co-pays, coinsurance, and
the annual limit you have to pay out-of-pocket before insurance covers
the remainder. “Importantly, check to see if your preferred doctors are
in-network,” advises Financial Planner Bitz.
Pre-existing condition plans. If you have existing
medical problems, many states have high-risk pool programs that can
help. If you have been uninsured for six months, have a pre-existing
condition, and have been denied coverage, you may be eligible for
insurance through a pre-existing condition insurance plan, or PCIP.
Every state is required by law to have a PCIP. You might also check into
to a “guaranteed issue” plan. For more details about your state’s laws,
visit statehealthfacts.org.
Set up a small business group plan. If you hire an
employee (your spouse, for instance) you may be eligible to buy a small
group insurance plan. This could come in handy, if you have a
pre-existing condition. Some states require that health insurers offer
guaranteed issue group health plans to small groups. And, presumably,
that means that your group can’t be turned down, even if the group has
members with health issues. You’ll probably need an insurance broker to
help set this up. Some states also have health benefits associations
that provide insurance for small-business owners with at least two
employees. Go to naic.org for help.
Stay employed. Contemplate getting a part-time job
where you can earn enough money to pay for your health benefits. Working
just 20 hours a week may also qualify you for group health benefits
with some employers. Don’t get your hopes up, though, a meager 16% of
all firms that offer health benefits provide them to part-time workers.
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