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Health Insurance for the Self Employed

© December 2005 Tony Lawrence

America doesn't have any form of national health insurance as I write this. One of the big concerns I often hear from people here who are considering self employment is the cost of such insurance. I hear "Oh, man that's a killer!" and "Maybe if my wife had health insurance at her job.."

Sometimes I shake my head in amazement. I'm not talking to anyone who is planning to create a minimum wage income from their business. In fact, quite the opposite: most of the people I talk to expect to be able to make good money from their product or service. So they have to buy health insurance. So what?

"Oh, but it's so expensive. I only pay $40.00 a week at work, and it's over to $1,000 a month for family coverage on my own". Yes, but let's have a reality check here. You don't really pay $40.00 a week. Your employer has effectively reduced your salary to cover the costs of the health insurance they are providing. The money doesn't come out of thin air; it's part of their cost of doing business and when you are self employed, it's just part of your costs. The only difference is that the really big employer might be able to shop around for price more effectively than you can, but nowadays they won't be paying a lot less than you will as an individual. It's just part of your overhead; plan for it, build it into your spreadsheets and budgets, and forget it. For most self employed people, even a premium family plan represents less than three hours of their time per week. It's really not a big deal, and if you don't need premium or don't have a family to include, it's even less.

If your projections are so tight that this will make a difference in your success or failure, you shouldn't be starting the business at all. This is a minor expense, and if you can put the "I was paying just $40.00 a week!" nonsense out of your mind and just get on with it, you'll be far better off.

I don't mean to trivialize this or ignore the reality that it's disgusting that a country as rich and powerful as the U.S.A ignores the health needs of its citizens. I was struck during the recent (September 2005) Hurricane Katrina disaster by politicians who made a great fuss of the humanitarian efforts government was providing. Wonderful, but every day the poor and disenfranchised go without needed medical assistance. Where's the compassion there?

Well, that belongs more in a political blog than here. The cost of health insurance should be one of your most minor concerns in self employment; a parenthetical afterthought that really does not have the great significance so many attach to it.

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Fri Nov 3 06:52:24 2006: 2586   anonymous

There is a solution for self-employed. It's called HSA Qualified Health Insurance Plans. For more information on how HSA plans work visit www.guidetohealthinsurance.org HSA Plans is the answer to ever increasing health insurance premiums. The problem is that a lot of people do not take time to understand how these plans work.

Fri Nov 3 11:32:19 2006: 2587   TonyLawrence

HSA plans don't necessarily cost less. For example, when I looked into these recently, the base insurance (which you must carry before contributing to your savings plan) cost more than the non-HSA plan I have now. The reason was that I don't carry prescription coverage in my current plan (don't need it) but the HSA base was not sold without it.

Thu Nov 9 16:05:59 2006: 2599   BigDumbDinosaur

I'd have to agree with Tony on HSAs. Several years ago I looked at an HSA as a possible lower cost means of getting health insurance. Like Tony, I found little benefit. The prescription drug coverage would have been nice -- if I had needed it at the time (I do now, but still see an HSA as a less desirable form of insurance).

Regarding the lack of a national health care policy in the USA, I have mixed feelings on it. On one side, we pay far too much for health care in this country. I mostly blame our legal system for this mess: get a handle on ridiculous malpractice claims (the average citizen is NOT worth millions of dollars, no matter what anyone thinks) and the cost of medical care will fall. Right now, doctors and health care facilities are walking on eggs and try to protect themselves from claims by running a lot of tests and getting many involved in the process -- not to guarantee the best possible outcome for the patients, but to minimize the likelihood of a lawsuit.

On the other hand, having lived and worked in several countries that do have a national health care system, I can state with some experience that medical care in those places is inferior to our private, market-driven system in terms of overall quality. In one case that I was acquainted with, a patient died waiting for surgery needed to correct a cardiac problem. This was the result of a government-controlled system that is glutted with patients, but lacks qualified doctors and facilities to serve them. Socialist medicine (which is basically what national health care amounts to) produces few incentives to attract and retain the kind of talent needed to handle the vast range of medical issues that a population represents. In a nationalized system where fees and such are government controlled, it's difficult for someone to make the committment required to become a doctor, knowing that his or her income will not reflect the time, effort and expense that was required.

As far as medical care for the low income/non-insured, I really don't think there's an answer to that problem. Our economy is capitalistic, and that means you have to put something in in order to get something out. Perhaps if some of those low income folks were to work harder to improve their lot (as well as curtail their procreative activities and perhaps alter their lifestyle to one that is more healthy -- you know what I mean) they wouldn't be sweating over health care issues.

Thu Nov 9 16:32:14 2006: 2600   TonyLawrence

There are many things we could do to reduce costs without going to free medical care. For one, we could unlock the stranglehold the medical profession has on the number of new doctors and change laws to allow more to be done by nurses and other medical specialists. We could have the government be the insurer for medical malpractice - or rather the payment source for claims. We could offer medical professionals more tax subsidies, and more protection from lawsuits. We could offer even more benefits and subsidies to folks running free clinics and the like.

Thu Nov 9 16:42:31 2006: 2601   TonyLawrence

By the way, most "low income" people work multiple jobs and often don't have easy access to healthy food choices. If you can't afford a car (or have disabilities that prevent you from driving), your choices can be even more limited.

Most of the poor are not lazy fools who have made their own problems. Some are, certainly, and some simply lack the intelligence to get by. But more often a simple chain of unfortunate circumstance has brought them to where they are and once there, it can be hellishly difficult to move out.

Fri Nov 10 16:27:30 2006: 2604   BigDumbDinosaur

There are many things we could do to reduce costs...

Who is "we?" The already overburdened middle class taxpayers like you and me? Sometimes with all this social engineering I feel like a footstool supporting an elephant. Just where is all the money for these "free" programs going to come from? As it stands right now, I work from January 'til June just to satisfy our annual tax liability.

Most of the poor are not lazy fools who have made their own problems.

I didn't imply that. Note that my rant said "some," not "all."

Yes, there are many poor people who work hard to make ends meet, and for those folks, I'm in favor of providing medical care for which they pay what they can -- and, if they can't pay, so be it. Better that they receive subsidized medical care and stay healthy enough to work and support themselves than end up being entirely dependent on welfare.

Where I draw the line is at those who don't work and live off public funds through various handout programs, e.g., the ones who were screaming at the cameras down in the Big Easy last year, telling us "we gots tuh hep them!" I intensely dislike people of that ilk and will not voluntarily do anything to "hep" them.

Fri Nov 10 18:58:43 2006: 2605   TonyLawrence

So how do you tell which is which?

You can't. Yes, there will always be people getting benefits they don't deserve. That's a small price to pay - it's unimportant. Catch 'em at it, deal with them then: but don't let your fear of it stop your support of social programs.

As to who "we" are: well, I haven't gone hungry recently, have you? I don't live in dirt and filth, do you? I have clean water, fresh food, and a pretty easy life. Sure, Bill Gates and Dick Cheney should be paying more taxes than they are, but that's still not a reason to ignore the needs of the poor.

Sat Nov 11 08:13:07 2006: 2606   drag

Well you can. It's just that you can't do anything about it.

When somebody ahead of you in line goes and spends forty dollars on cigarettes, then brings up 40 dollars worth of junk food which they pay for with foodstamps.. then I'd say that ya they are screwing the system. Yep. Been there, seen that.

There was a few years I lived with a income less then 7 thousand dollars a year, paid rent on my own, and such. Sure there was a few days I didn't eat, but it wasn't the worst thing in the world.

When I had my heart surgery (by that time I had a good paying job with health insurance, which I worked hard on getting) there was people ahead of me in the hostpital that were obviously less well off then me, but they were still getting medical help, and they were getting it from some of the best doctors in the country.

The way I figure it if your able body adult and your not able to take care of yourself then more then likely it's your problem.

If your a single mom with a bunch of kids then it's different.. The kids are worth it to sociaty to take care of despite the fact that the mom may try to graft the system. If your elderly and/or if your unable to take care of your medical bills then you should get assistance.

Also this stuff needs to be taken care of on a more of a state and local level rather then federal level anyways. That way it's much more accountable and since each community tends to face it's own paticular problems then it make sense that they'd be able to be much more efficient at dolling out other people's money.

I can't imagine that the same legislation with this sort of thing is going to work well for San Fransico as small town South Dakota.

Federal level support is only going to be required when local taxes can't cover it. Economic disasters (main plant that employees 20% of the workforce closes down), environmental disasters. That sort of thing.


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