Navigating the System: When You’re Self-Employed
Ask anyone who has left the big firm to start their own business: quality health coverage is often more expensive when you are self-employed. Finding an affordable plan that fits your needs can be so frustrating and time consuming that many self-employed people decide it is just not worth it.
When you consider that illnesses and injuries trigger a large percentage of personal bankruptcies in the United States, remaining uninsured is really not an option. The long-term success of your business depends on making a well-informed decision about your health insurance. One illness, surgery, or series of tests can put you into financial ruin.
Also, the Affordable Care Act further narrows your choices to buying insurance or paying a penalty. Considering the escalating cost of healthcare, insurance is the better option. It is important to make buying insurance worth your time.
Assess Your Needs
The first thing to do when looking for the right insurance plan is to determine your healthcare needs. There is no “best” plan or provider; they each have their own set of benefits and drawbacks. By asking yourself the following questions before you begin shopping around, you can focus in on the options that are most important to you and your family:
- How comprehensive does my coverage need to be?
- What limit on my choice of doctors and hospitals am I willing to accept?
- Am I okay with my primary care provider referring me to specialists for additional care, or would I rather have the freedom to visit a specialist on my own?
- What is the co-pay for medications?
- Do I have access to other services, such as physical therapy or mental health care?
- Do I have coverage for pregnancy and childbirth services?
- What can I afford to spend monthly?
- How much am I willing to spend on anticipated healthcare costs, such as medical check-ups, preventive services, and care for pre-existing conditions?
- If I were to be involved in a costly medical emergency or have an unanticipated health problem, how much would I be able to pay?
- Would I be able to keep track of my medical receipts and file my own claims if I were required to do so?
When meeting with an insurance agent or sifting through your options online, keep your answers to these questions with you. This can help you quickly eliminate plans that are not right for you and identify those that are.
People who are self-employed may have access to a group plan, or they may have to buy an individual policy. Group health plans offer lower premiums because insurers spread the risk of claims over all members of the group.
Group plans are typically offered as part of an employee benefits package, but people who are self-employed may be able to gain access through a group purchasing alliance, such as a union, professional association, or membership in a social or civic group.
In addition, some states and chambers of commerce offer group-rate insurance to the self-employed.
The National Association of Insurance Commissioners
provides links to each state's insurance departments.
If you are unable to buy insurance through a group, you may need to buy an individual plan. The catch with individual plans is that the out-of-pocket expenses and premiums are often much more expensive.
Do Your Homework
When searching for an insurance plan, first determine what type of health plan is best for you. There are 2 general types of plans: indemnity or managed-care. Indemnity plans (or fee-for-service plans) offer more choice of healthcare providers, but are usually more expensive and require members to do more paperwork. Managed-care plans have agreements with a network of providers, which allows your out-of-pocket costs to be reduced.
Managed-care plans include preferred provider organizations (PPOs), health maintenance organizations (HMOs), individual practice associations (IPAs), and point-of service (POS) plans. Briefly, HMOs require members to be referred to specialists by primary care doctors, but are usually the least expensive option. PPOs allow members to see specialists within the network and without prior approval. POS plans are more flexible (and more expensive), offering members some coverage when referring themselves outside of the plan. IPAs are HMOs that contract with individual practitioners or an association of practices to provide health care services in return for a negotiated fee. The IPA compensates physicians according to a fee schedule.
Where do you begin your search for health plan options? You can ask friends, family members, or colleagues if they know of a reputable insurance agent. You can also locate an agent through a professional organization, such as the
National Association of Insurance and Financial Advisors, the
National Association of Health Underwriters, or the
Independent Insurance Agents and Brokers of America. And there are numerous websites that provide comparison quotes from multiple insurance companies.
The Affordable Care Act, which rolled out in early 2014, allows you to shop around for insurance with the new online Marketplace, which may trigger companies to be more competitive so that you can get the best price. New features and improvements to the system are expected in future releases.
Compare Your Options
Once you locate a list of plans that meet your basic needs, make sure that the plans are licensed to sell health insurance in your state. And make sure you have a clear understanding of what benefits are covered under each policy by reading all the documentation carefully. Pay special attention to how each plan handles the following:
- Physical examinations and health screenings
- Immunizations and other preventive services
- Specialist care
- Emergency care
- Prescription drugs
- Vision care
- Dental services
- Mental health care
- Drug and alcohol abuse services
- Family planning services
- Care for chronic conditions
- Care for disabilities
- Physical therapy
- Home health, nursing home, and hospice care
- Alternative health care, such as chiropractic care, acupuncture
- Experimental treatments
Finally, look closely at the costs of each plan. Some plans offer lower premiums coupled with higher deductibles and other out-of-pocket costs, while others are more comprehensive but require higher monthly premiums.
If buying a comprehensive health plan is not feasible for you, consider catastrophic health insurance as a last resort. These plans have high deductibles and low monthly premiums. They cover hospital stays, surgery, intensive care, and some diagnostic tests, but generally do not pay for routine health care, medications, mental health care, or pregnancy-related services. These catastrophic health insurance policies are typically only available to healthy people without pre-existing conditions.
America's Health Insurance Plans
National Association for the Self-Employed
About the law. Department of Health and Human Services website. Available at: http://www.hhs.gov/healthcare/about-the-law/index.html. Accessed May 17, 2016.
Finding health insurance. USA website. Available at: https://www.usa.gov/finding-health-insurance. Accessed May 17, 2016.
Health care reform frequently asked questions (FAQ). National Association of Insurance Commissioners website. Available at: http://www.naic.org/index%5Fhealth%5Freform%5Ffaq.htm. Accessed May 17, 2016
Health coverage for the self-employed. Health Care website. Available at: https://www.healthcare.gov/what-if-im-self-employed. Accessed May 17, 2016.
Key features of the affordable care act by year. US Department of Health and Human Services website. Available at: http://www.hhs.gov/healthcare/facts/timeline/timeline-text.html. Accessed May 17, 2016.
Managed care terms. Academy of Managed Care Pharmacy website. Available at: http://www.amcp.org/ManagedCareTerms. Accessed May 17, 2016.