If you’re self-employed, you’ve found some great deals: the hours are as long as you want to work, the dress code is pretty nice, and you have all the coffee you can stand. But you’ve noticed that there are a number of fringe benefits your boss can’t supply for you: sick days, holidays, overtime, expense money, and the all important health insurance.
Not much can be done about most of your fringe benefits, alas. There is no money tree, and there is no time tree. But when it comes to health insurance, you can’t afford to forget about it. If you have a catastrophic illness, not only do you not have medical coverage, you have no income at all.
What can you do?
The easiest thing to do is to marry a spouse who has medical coverage, and then tell them for the rest of your marriage that was the real reason you did it — no, don’t do that! Seriously, though, if your spouse carries medical insurance, you’re one of the lucky ones. You have to keep a close eye, however, on his or her employment; if there’s a chance that job might be lost, you need to move on to a Plan B.
Plan B is purchasing your own individual insurance policy. These tend to be pricey. You’re not covered under group insurance, so you’ll probably not get a wonderful deal. You can’t expect your employer to pitch in a percentage — well, you can, but since you’re the same person, it really doesn’t matter. And if you and/or your family have a pre-existing health problem, you will really pay for your coverage.
There are a few things you can do to keep your costs down.
1. Choose a policy with a high deductible and high or no co-pay, and set cash aside to pay immediate medical expenses. This is called a catastrophic health insurance policy because it’s unlikely to kick in unless you have a real medical emergency. This works beautifully for anyone who is basically healthy. Most medical insurance today is treated like a medical piggy bank, instead of something for emergencies; by choosing a catastrophic policy, you make insurance act like insurance again.
2. Keep every medical receipt you get to take off your taxes later. This is a no-brainer, but if you’re using the catastrophic insurance policy, you might be surprised at how quickly those receipts add up.
3. If you have kids and no spouse, swallow your pride and see if your income makes you eligible for your state’s free insurance program for kids. Almost every state has one. You can find information on it at your state health department website or at your local health department offices. And if you only have to cover yourself on your insurance policy, not your kids, you can set more money aside for emergencies, or maybe even buy a Happy Meal once in a while.
4. Enroll in a health club, and start eating sensibly. Prevention is the best insurance in the world. If you take care of your health, you are less likely to get sick, less likely to need those trips to the doctor, and you might even get lower insurance premiums.
5. If you belong to a union, professional group, Chamber of commerce, or any other organization, ask if they have a group insurance policy for their members. A surprising number of these organizations do, and you’ll get a group rate if you get your insurance this way. Weigh carefully, though, the benefits of your catastrophic insurance policy versus the one your professional group has negotiated. You might be better off with the catastrophic.
6. Shop around. You can get a discount on your insurance if you go through a company you have already purchased insurance through for other reasons.
7. Look into income protection insurance too. As a self-employed person, your insurance is at real risk if you suddenly become ill. The price on these is generally pretty reasonable. You should, however, weigh the likely benefits of purchasing this policy versus the benefit of taking your premium and depositing it directly into an interest-bearing savings account.
8. Don’t overlook the possibility of self-insuring. Especially if you are young and healthy, it might be worth it to simply set aside the money you’d normally pay for medical insurance. You are running a risk if you do this, but if your auto and homeowners insurance covers you in case of accident, you have little to worry about health-wise except for your own real health. If you take care of yourself, exercise regularly and see a doctor at least once a year, chances are very good that you’ll be fine doing this. And if you don’t get sick, you have a nice nest egg set aside at the end.