If you’re self-employed or thinking about it and you live in the U.S., one of your biggest concerns is likely to be health insurance. Most people in the U.S. — about 60% according to the National Coalition on Health Care — get health coverage through their employers.
But the health insurance outlook for the self-employed is not as bad as you might think. If you are reasonably healthy, you might be surprised how cheaply you can arrange coverage, especially if you choose a high-deductible health plan. And now that health insurers are looking for growth beyond their bread-and-butter large group policies, you could see even better rates as those insurers compete for your health coverage dollars.
The Wall Street Journal reports (behind the subscription firewall, unfortunately) that insurers are turning their attention to the individual insurance market as the large group plan market stagnates:
[Insurers'] core business — selling group plans to large employers — is stagnant. A Bain & Company analysis of the health-insurance sector shows that total commercial health-insurance enrollment has been flat at around 174 million people since 2001. In response to rising costs, employers have steadily pared back benefits, and the percent of businesses offering health insurance has fallen to 60% last year from 66% in 1999. Since the 2001 recession, the number of contractors, part-timers and small-business employees has grown two to six times faster than the economy overall. In contrast, traditional workers — the full-time company employees that provide the insurance companies’ bread and butter — have declined 0.6%. As a result, profit pools in corporate-funded health plans are shrinking.
So what does that mean for you? It depends. It depends on what health issues you and your dependents have, what state you live in, and even what coverage you’ve had in the past, because some legal guarantees only kick in if you don’t drop coverage for too long.
If you are looking for health insurance on the individual market, here are a few tips to guide you:
- Find a good health insurance broker. A broker who’s knowledgeable about individual policies in your area will be able to help you find just the right health insurance plan for your situation. They can easily check rates at multiple insurance companies, inform you about laws that might apply to your situation, and counsel you about your best course of action.
- Consider a high-deductible health plan with a health savings account. These plans feature high annual deductibles but allow you to establish a health savings account to which you contribute pre-tax earnings. Because of the high deductibles, the policies are usually quite a bit cheaper than regular policies. And the health savings accounts have a variety of nice features, including long-term accumulation of savings and tax-free interest if you don’t use up the money in the account. It’s a great way to save for future health expenses while keeping the lid on current expenditures for your insurance.
- Don’t drop coverage. Besides leaving you at risk for financial disaster should you have health problems while uncovered, it also means that if you later get coverage through an employer or other group plan, the insurer may not have to cover pre-existing conditions. The Health Insurance Portability and Accountability Act (HIPAA) says that if you maintain coverage without a significant break (generally defined as 63 days or more), a new group insurer cannot exclude pre-existing conditions, although an individual insurer may be able to, depending on your state’s laws. Always maintain coverage, even if you do so with the most bare bones of policies.
- Consider COBRA health coverage continuation only as a last resort. The federal Consolidated Omnibus Budget Reconciliation Act provides for continuation of group health care coverage for up to 18 months (or longer if you are disabled) after you leave a job. Although it will cover you if you have no other options, it is time-limited and often very expensive. Do use it to keep unbroken coverage if you need to while waiting for eligibility for another plan, though.
For more advice on health insurance for the self-employed, check our open thread where readers shared their experiences. And let’s hope that America’s next president takes decisive action to help those who cannot obtain affordable health coverage for themselves and their families, even as we each (I hope) find the coverage we need for ourselves and our families.