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.
But considering that illnesses and injuries trigger a large percentage of personal bankruptcies in the US, 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.
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. But 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 can I afford to spend monthly?
- How much am I willing to spend on anticipated health care costs (eg, 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.
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 two 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.
Beginning in 2014, you will have even more options as a self-employed person. This is because the Affordable Care Act will allow you to shop around for insurance with the new online "health exchange" system, which will trigger companies to be more competitive so that you can get the best price.
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 (eg, 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, medicines, 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
Choosing a health plan. Agency for Healthcare Research and Quality website. Available at:
. Accessed August 14, 2012.
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 August 14, 2012.
Health Reform.gov. Fact sheet: the affordable care Act’s new patient’s bill of rights. Health Reform.gov website. Available at: http://healthreform.gov/newsroom/new%5Fpatients%5Fbill%5Fof%5Frights.html. Updated June 22, 2010. Accessed August 14, 2012.
Managed care terminology. US Department of Health and Human Services website. Available at: http://aspe.hhs.gov/Progsys/forum/mcobib.htm. Accessed August 14, 2012.