Tackling Health Costs on Your Own
Insurance is pricey, but new technology and plans can ease the burden
(MONEY Magazine) – Of the many challenges facing a corporate escapee, finding adequate, affordable health insurance may be the toughest. Of the 27 million working people who are uninsured, 63% either are self-employed or work for a small business, according to the Employee Benefit Research Institute. You can find coverage that fits your budget--but you need to be smart about it.
KEEP WHAT YOU HAVE Your best move may be to hang on to your corporate benefits, particularly if you like your doctors or are in poor health. Under COBRA rules, as long as your company employs 20 or more people, you can keep your insurance for up to 18 months if you leave your job for any reason other than gross incompetence. But brace yourself: You may have to pay full freight plus 2%. And according to the Kaiser Family Foundation, workers cover just 28% of their insurance costs on average. Still, chances are an employer policy will be cheaper and better than anything you'll find on the open market. Plus, premiums are deductible in full if you're self-employed.
SWITCH, THEN QUIT If you can plan ahead, sign up for the cheapest plan your company offers during open enrollment. If you're married, see if joining your spouse's plan (or just adding the kids) will cost less than COBRA.
GO SOLO Sooner or later you may want or need your own policy. If so, consider the Internet your best friend. At ehealthinsurance.com, dozens of plans in your zip code are a keystroke away; comparing features is easy (including checking out the insurer's financial health). If you prefer to shop face to face, interview at least three agents and compare plans and prices carefully. Don't skimp on the due diligence: At your state insurance commissioner's site, you can look for complaints about an insurer or agent.
DON'T BE RASH If you have health problems or a pre-existing condition, be especially sure you follow the rules. By law, you're guaranteed access to insurance as long as you've exhausted your COBRA coverage and find a new policy within 63 days. If you don't, you could be turned down or have a pre-existing condition excluded for up to a year.
UP YOUR DEDUCTIBLE A new way to lower your premium is to buy a high-deductible plan (at least $1,000 for an individual) linked to a tax-advantaged health savings account (HSA). You fund the HSA with pretax dollars and tap it for unreimbursed expenses. The average premium for family coverage in 2004 was $9,602, according to Kaiser. The average for high-deductible coverage: $6,839. Search for an HSA-eligible plan and an HSA at hsainsider.com.
JOIN OTHERS If your business grows so much that you can hire help, link your little pool to a bigger pool. Professional employer organizations offer a wide array of human-resources services, including health insurance, to small businesses. Look for one at the National Association of Professional Employer Associations website (Napeo.org). A second option is a plan offered by a membership group, trade union or chamber of commerce. But tread carefully. There have been significant problems with fraudulent plans. Check out the plan with your state's insurance commission, even if it's being offered through an organization you trust.