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:
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.
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.
