Stay covered: health insurance for the self-employed

Evanston Hospital/Heather Perlberg/MEDILL

The post-recession economy has many newly self-employed (read: unemployed) Americans shopping around for the right health insurance plan, a daunting task for those who are used to the one or two options offered by their former employers.

Now, they must choose from among dozens of individual insurance plans to determine which will offer the best protection for the money. And it’s no small problem.

Of the nearly 50 million Americans that are uninsured, more than 1.7 million are Illinois residents, according to U.S. Census data. But going without coverage, or purchasing the wrong plan, is risky at best.

An unforeseen medical problem could destroy the financial security of even the best budgeter, says Francine Duke, a certified financial planner and owner of Aqua Financial Planning. “It can wipe somebody out,” she warns.

Duke cautions people not to skimp on health insurance despite the expense. “Cut something else,” she says.

So before you start comparing policies, consider these pieces of advice offered by local insurance agents and financial planners.

1. Check to see if any organization you belong to has a group plan. Trade organizations and associations sometimes offer health insurance coverage. Most independent plans will involve higher costs and larger deductibles, but “with a group policy, you’re generally going to get a better deal, more bang for your buck than an individual policy,” Duke says.

2. Be aware of how plans address the treatment of pre-existing conditions. Illinois health insurance laws define pre-existing conditions as conditions you have either received medical treatment for or were diagnosed with at some time before the activation of your health insurance policy. Some policies have a one-year waiting period before they start covering pre-existing medical conditions.

“But if you stay with the same insurance carrier you can get something called a certificate of credible coverage,” Duke says. So as long as you meet certain requirements (i.e. for the last 500 days you’ve been covered by the company) insurance providers will waive the pre-existing condition exclusion.

3. Stay away from hospitalization-only plans. Healthy individuals usually assume that they only need coverage for catastrophic events. But most treatment nowadays – and expensive treatment – occurs outside of hospitals. If you have a heart attack, you might be in the hospital for a day or two and then have continuing expenses and follow-up testing, that wouldn’t be covered with a hospitalization-only plan, says Sheila Meyer, an account executive at T.A. Cummings Jr. Company. Limited benefits are just that – limited, and may not be appropriate in the long term.

4. Be sure that prescription medications you take regularly are covered. “You want a plan that will cover outpatient prescriptions,” Meyer says.  If you choose a plan with a large deductible, it is possible you will not have prescription coverage for a long time. But if a higher-deductible plan better suits your lifestyle, ask your doctor to switch you to a generic version of the same medication, which can offer huge savings.

5. If you plan to have a child, make sure maternity coverage is included. Maternity coverage isn’t automatically included in individual policies. In fact, only one provider in Illinois ­– Blue Cross Blue Shield – even offers it, according to Cody Hebden of Lakeview Insurance Agency, Ltd. And it almost doubles your premium.

Families should be prepared to wait a year until the maternity coverage kicks in, otherwise gynecological visits and all medical appointments related to the pregnancy will need to be paid for out of pocket. “You can’t imagine how costly it is,” Hebden says, adding that young families could try to visit area clinics for prenatal care. “But there are very few alternatives.”

6. Make sure the provider network suits your medical needs. Go online to the provider’s network and make sure doctors you use are in it. Check to see if the plan has enough physicians and specialists, Meyer says. Less expensive plans come with smaller networks and fewer options for care providers.

7. Look into a health savings account, or HSA. In an HSA, you put money into an untaxed account and pair it with a higher deductible plan. (Self-employed health insurance costs are also tax deductible.) All medical expenses including treatment, drugs, testing and doctors visits go toward the deductible and after it has been met, your medical expenses are covered. So essentially, nothing is covered until you meet your deductible. This option would be considered more of a catastrophic coverage plan.

8. Give yourself enough time. “The underwriting is very tough,” Duke says, meaning the insurance company’s investigation of your application and health history. “They’ll put you through conference calls and numerous phone calls. It can take months to get an approval.”

Leave a Reply