The joys of health insurance while self-employed

Most Americans won’t put much thought in to their health insurance plan until they’re dealing with the financial aftermath of a serious illness. When you’re self-employed, you get to deal with the horrors of this for-profit bureaucracy up front, too.

Anyway, most Americans get their health insurance coverage from their employers as a job benefit. Those of us who don’t have an employer are left to go shopping – and the process can be quite frustrating if you’re unprepared or unfamiliar with the terminology.

Comparing Plans

Every plan you consider will be defined in terms of industry jargon: co-pays, deductibles, out-of-pocket maximums, and waiting periods will determine exactly what is covered and what share the insurer will chip in. Let’s take a look at what these mean in basic language so you can shop smarter:

• Co-Payments: Co-payments are the amount you’re required to pay up-front for basic services like visiting your general practitioner or a specialist. Generally, these will range between $15 to $50 per visit for a GP or $30 to $100 for a specialist. Many cheaper health insurance plans have no co-payment coverage, so if you want to save a little on your monthly premium you’ll have to pay the full price any time you visit a doctor or clinic.
• Deductibles: For covered services that don’t have co-payments listed, you’ll still have to pay a bunch of cash before the insurance starts to kick in. This is the annual deductible. For example, if you have a $5,000 deductible and end up using $10,000 in hospital services, you’ll owe at least $5,000 (and possibly even more when co-insurance and out-of-pocket maximums are added in). If you go back to the hospital that same year, your deductible will still be satisfied, but if you get sick the year after that you’ll be back on the hook for the full amount once again.
• Co-Insurance: Co-insurance is the portion of a covered service that the insurer will pay – after you’ve paid your deductible. Going with the example above, and a co-insurance rate of 50%, you would pay the $5,000 deductible and 50% of the remaining $5,000 – for a total of $7,500.
• Out of Pocket Maximums: The out of pocket maximum is a little bit different than the deductible. It is the highest amount of money you’re liable for annually after the deductible is paid. So if you’ve got a $5,000 deductible, 50% co-insurance, and a $10,000 out of pocket maximum, you’ll pay $7,500 for a $10,000 hospital bill or $10,000 for a $100,000 one.
• Waiting Periods: This is the amount of time you have to wait before your coverage kicks in, and there are two basic types. Waiting periods for pre-existing conditions mean you can’t get payments for illnesses and injuries that occured before your coverage began. If you had a different qualified plan for most of the year before starting your new one, they’ll probably waive the requirement. This is theoretically designed to prevent people from going without insurance until they find out they’re sick. The other type of waiting period is common in dental insurance plans, and it simply doesn’t cover anything until about six months after the coverage starts. There’s no good way around these except being careful and patient!

Providers and the Political Debate

You’re probably going to end up with BlueCross, Cigna, or Kaiser – although there is a little bit of variation in providers from state to state. Here in America we’re still operating under the idea that competition among insurers will improve quality and reduce prices: but there isn’t actually a whole lot of competition, we end up paying higher prices than the rest of the developed world, and there’s no indication that we’re getting a higher quality product for that higher price.

The latest round of political regulation won’t do much to change things, either. Big insurance companies still dominate state-limited markets, and they get a rather generous amount of room for overhead and profit cooked in to the annual premium. While the status quo is good for the insurers themselves, it doesn’t do much for the efficiency of American businesses at large.

Individuals won’t have much of a choice to take the risk and go without insurance anymore, as failure to purchase some sort of qualified plan will result in a small but significant tax penalty.  The good news is that you might just be eligible for some financial assistance if your income is low.   The bad news is, you’re going to be spending a whole lot of time on hold while you try to find that plan or get a claim paid!