Recently, I read an article in this publication, “The Middle-Class Struggling with Health Insurance.” Health insurance costs are certainly an issue for everyone today, especially the self-employed and those working for small companies. Many companies are trying to cut costs and those cost-cutting measures may eliminate employee health coverage, forcing employees to find coverage on their own. Consequently, many employed individuals and families are now facing the same challenge small business owners have been facing for years–finding affordable insurance.
The nation’s uninsured population of approximately 45 million has risen dramatically in recent years. According to Todd Stottlemyer, president of the National Federation of Independent Business in recent testimony before Congress, nearly 63% of the uninsured are small business owners or employees of small businesses.
Many uninsured are unaware of an alternative to costly individual health polices. Individual policies, unlike group health insurance, have premiums based the risk factors of the particular individuals covered by the policy, meaning the risks are not shared by a large group, making the polices much more expensive than group insurance. Without knowing about alternatives to individual polices, many will simply elect to forgo health insurance once confronted with the enormous costs of individual health coverage.
Individual polices not only are expensive, they limit the insured’s ability to design a plan that meets their needs. Individual health polices are usually “off the shelf” polices that have set coverage.
In addition, many who leave a corporate position and enter business for themselves are shocked at the real cost of health insurance. While in their previous position, their employer was paying a portion of their premium. What they paid wasn’t the premium for their insurance, but a percentage of the premium. When faced with the reality of having to pay the full premium themselves, many refuse, leaving themselves and their family uninsured.
Health insurance costs are undoubtedly rising. The cost of healthcare continues to increase, from the cost of visits to the doctor, hospital costs, pharmaceutical costs, emergency care, and all other aspects of healthcare.
Yet, perceptions about healthcare and insurance have not changed. People want the freedom of self-employment, or to work for a small company, but they want the same benefits and costs they have become used to when working for a major corporation.
The self-employed and those working for small companies must rethink their concept of health insurance. Health insurance, like auto insurance and home insurance, is designed to protect against catastrophic loss, not for every sniffle. Rather than viewing health insurance as a go to the doctor free card, health insurance should be viewed as protection against disaster.
Home insurance doesn’t protect against losing a single shingle or two. It protects against catastrophic roof damage. Auto insurance doesn’t protect against dings, minor dents and flat tires, it protects against significant loss due to accident, fire, theft, or other damage. Health insurance should be viewed no differently for the self-employed. It is protection against major loss, not minor dents and dings.
In addition to a change in the way health insurance is perceived, uninsured people, whether self-employed or working for a company that doesn’t provide a group policy, have alternatives to the costly individual policy. Joining a group to purchase health insurance through business or industry associations cannot only reduce the cost of the health insurance policy; many times the individual has the freedom to design a plan that works for them and their family. Moreover, association policies are typically available to both self-employed and employed individuals and families.
Calynn Colceri, a hair stylist, had an individual plan through a well-known national company. She had bought her individual “off the shelf” plan based solely on price. She was unhappy with the coverage, which didn’t meet her needs and she was distressed that the company increased her premiums on a regular basis. By showing her a group plan through an association, I helped her design a plan that meets her needs precisely, expands her coverage in many areas, and is cheaper than her individual policy. Not only have her premiums decreased and her coverage improved, she has also gained a number of additional business benefits that directly affects her business through her association membership.
If designed correctly, self-employed individuals can also take tax credits for their deductibles, dental, vision and other medical expenses, up to 100% of the costs, further reducing the real costs of the health insurance. To determine how much, if any, tax savings one would be eligible for, a tax professional should be consulted.
Although a serious issue, health insurance can be a manageable expense for most Americans. Certainly, it may require a new mindset regarding the use of insurance, but if approached rationally and by seeking out group alternatives to the individual health policy, health insurance need not be the financial monster it is perceived to be.