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"The Health Insurance Mystique...Exposed"

By Paul Bednar

There is a perception that free agents are unable to get health insurance, let alone affordable health insurance. If this perception were true, why are so many people becoming self-employed? Would these people go out on their own if they couldn't get health insurance? Of course not! This article explains the best method to get health insurance, how to get the cheapest policy, and steps to follow before selecting your insurance.

First, understand that health insurance costs more than you realize. When you were an employee, you weren't aware of the total cost of your health insurance because your employer paid a percentage of the cost. Now, as a free agent, you pay 100% of the cost. However, there is a tax deduction on your premiums. You can deduct 70% of your premium's cost for tax year 2002 and this deduction increases to 100% in tax year 2003. See IRS Publication 535, Business Expenses, for more information.

Second, health insurance premiums are the greatest for an individual or a single family, not for groups. The reason is that groups have more buying power and therefore more bargaining power. So consider joining an organization that provides health insurance to its "members". The organization could be from your profession or an outside organization that allows individuals to join.

There are many organizations that provide health insurance to free agents. Below is a brief list to get you started:

National Association for the Self-Employed: http://www.nase.org

Independent Computer Consultants Association: http://www.icca.org

National Federation of Independent Businesses: http://www.nfib.org

Insure.com: http://www.insure.com

My personal favorite is the Farm Bureau. And no, you don't have to be a farmer to join. I've been a free agent in two states and in both cases the local Farm Bureau has had the best health insurance. To contact your state's Farm Bureau, visit http://www.farmbureau.com and click on your state.

As with all health insurance, just because you join the organization it does not automatically mean you'll be insured.

There is another health insurance option for people who have been recently laid off. You can keep your former employer's health insurance for up to 18 months through the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 provided you pay the entire premium each month. After this time period, you have to find another health insurance plan.

Something else to investigate is whether you are able to sign on to your spouse's health insurance policy. This may cause an increase in the premium but there's a good chance it costs less than your individual policy.

Now, let's talk about health insurance premiums.

People are accustomed to paying a $5 - $20 co-payment for a doctor visit. However, they may not realize that for this convenience they pay a higher monthly premium than people willing to pay a higher out of pocket cost.

The cheapest health insurance premiums have the largest out of pocket expenses. Usually, this requires you to pay the first $1,000 - $1,500 per person or $3,000 - $5,000 per family. Once your expenses cross this threshold, the insurance pays between 80% - 100% of the ensuing costs.

If your yearly healthcare typically consists of a routine physical, which isn't usually covered by insurance, the large out of pocket expense makes the most economical sense.

If you or your family require more healthcare than routine physicals, the decision is more complicated. Be sure to identify insurance plans that best suit your or your family's expected healthcare needs.

Before making any decisions about your health insurance, follow these steps:

1. Contact organizations and request their information.

Be sure to get information from at least 3 different companies.

2. Read the details of each plan,

especially the fine print.

3. Ask a lot of questions.

It is better to get your questions answered now than to find out you may not be covered. For example, if the lifetime limit is $1,000,000, what happens if it is exceeded? Is the coverage still valid or does another process begin?

4. Evaluate your options.

Compare the pros and cons of each alternative.

Now you know what is involved to acquire health insurance. Eliminate the perception and make it a reality.

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Copyright 2002 by Paul Bednar. He writes a free newsletter about
the business aspects of freelancing. Each issue contains an
informative article, answers a common question, and shares a
lesson learned. Visit http://www.free-agent-information.com to
subscribe or email mailto:subscribe@free-agent-information.com.

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Paul Bednar. He writes a free newsletter about the business aspects of freelancing. Each issue contains an informative article, answers a common question, and shares a lesson learned. Visit http://www.free-agent-information.com to subscribe or email mailto:subscribe@free-agent-information.com.