InsuranceYak.com

September 03, 2008 3 Comments

Part two of the continuing saga of getting health insurance in the USA.  

Some health insurance options when  taking the self-employment plunge:

• COBRA
• Individual health insurance/ small group health
• Temporary coverage
• Part time coverage for the benefits
• Move to a state that has offers major medical or catastrophic coverage for uninsurable citizens.

I covered COBRA coverage in an earlier post, so today I’ll discuss individual and small group health plans.

How to Shop:

Find an independent agent who specializes in health insurance. Ideally, this agent has access to more than one company and can advise you on coverage and best fit for your situation. 

 The best way to find a good agent: get a referral. If you’re new to the self-employed world, you need to get out and meet other self-employed people.  Ask how they get health insurance and who their agent is.

Chamber of Commerce or affiliate heath coverage:  In my area Blue Cross Blue Shield (BCBS) offers a ‘Chamber of Commerce” plan for people who are members of the local chamber.  In reality this is a marketing gimmick; you will get a small discount on the BCBS plans, but must pass the standard medical screening. The good part: you will get connected with a health insurance agent. Other professional groups offer health ‘access’ to their members; again depending on the group you could be offered a legitimate leg up on non-members or it could be just a marketing ploy. 

First things to ask about:

Renewability:  The majority of individual health plans are guaranteed-renewable until age 65.  This means the insurer cannot cancel just you; the only way they can cancel your insurance policy (once issued)  is for non-payment, misrepresentation (you lied about something), or they leave the market in your area and cancel everyone.  On this note, remember it’s always a good idea to pay your monthly premiums automatically:  If you don’t and you miss a bill, the insurer does not have to reinstate you.  If they evaluate your policy and you’ve been too expensive for them, they can leave you cancelled or offer you coverage at modified terms (more expensive and/or less coverage).

Benefit Levels: Check coverage for things you would take for granted in a large group policy:

•  Maternity – not a given for individual polices
•  Automatic coverage for newborns
•  Mental health coverage
•  Chiropractic care
•  Prescription drugs: This is a tough one on individual policies, especially with pre-existing conditions. Expect higher co-pays and a shorter lists of approved drugs.
• Dental care: Forgetaboutit – there is no individual dental plan that has a breakeven point with premium vs coverage.  Better to shop around and negotiate prices up front with the dentist.

Pre-existing conditions: It’s always better to disclose these up front.

Upon learning about pre-existing conditions, a prospective insurer can offer you three choices: 

• Pre-existing conditions will be covered
•  Pre-existing conditions will be excluded from coverage, either permanently or for a set period of time
• Coverage will not be offered.  

Lying about pre-existing conditions:  

Good luck with that; you’re setting yourself up for a denial of coverage confrontation down the road. 

Many insurers will take you at your word during the application process knowing if you become expensive down the road, they’ll cancel you for not being upfront about pre-existing health issues. Worse yet, they can retroactively cancel you and demand payment for any treatment they’ve paid for.  OK if you’ve found an agent, and determined you want coverage, now you can take the next step:

Applying for coverage: 

Be prepared to fill out multiple pages asking for detailed information on everything under the sun.  Unless your health/age/weight are pristine, expect the process to take between 3 weeks and 3 months.  Be prepared to sign up for COBRA from your old employers or parents group plan while you wait.

If you are applying for a small group plan (size of a ‘small group’ depends on the insurer, let’s say 25 employees for example) expect the application process to include a ‘census’ and a ‘billfold biopsy’.

Census:  A count of all employees to determine:

• Ratio of employees who want the group coverage; the insurer will want to see greater than 75% coverage.
• Average age of employees and type (individual, family, individual + children) of coverage.
• Overall health and pre-existing conditions employees have.
• Do you want bells and whistles? Group life, short-term disability, long-term disability, dental, vision care, flexible spending account or healthcare spending account.

Billfold biopsy:

The insurer needs to know if you’re financially stable enough to pay the bills once coverage is put in place. Once the company underwriters have evaluated the information provided, coverage will be offered or declined. If coverage is offered, then the employer or individual is responsible for paying the bills. There is no rule or statute concerning what percentage is paid by employer or employee on small group plans.   

Controlling costs:

Costs are controlled by two methods:

• Reduce coverage: take a plan with less coverage or fewer options.
• Select a higher deductible.

Determine the maximum out-of-pocket deductible with each policy option.  If in doubt, take the lower deductible; remember you can always move to a higher deductible but not always to a lower one.

The uninsurable:

 If you or a family member have a condition that keeps you from getting individual health insurance, consider some other options:

• Get a corporate job that offers group medical insurance.
• Start a small group plan where you work.
• Check if your state has a major medical plan for the uninsurable. If they don’t, move to a state that does.
• Get a part-time job that offers medical coverage. 
• Move to Canada or France.

Do these solutions seem extreme?  Without health insurance, you’re playing financial Russian roulette.  I know people who’ve put their hopes and dreams on hold so they could stay on a corporate payroll just for the insurance.  I personally know wealthy, successful businessmen whose wives work as part-time cashiers for the health benefits.

I hope you found this helpful. Does anyone have stories to share dealing with getting health insurance coverage?

Health Insurance

Permalink Comments RSS