Self-employed Health Insurance: The Painful Reality

by Cathy Miller on March 18, 2014

in Health Insurance

An adding machine or calculator with adding machine tape or paper.Self-employed health insurance comes with harsh realities.

  • No employer contributions (unless you want to thank yourself for paying it all)
  • No group discounts for supplemental products (like dental, vision, life and disability insurance)
  • No premium discounts for wellness program participation

No – No – No.

Makes you feel like a chastised child.

We did not even catch a break on health reform’s individual mandate. The Affordable Care Act provision requires all eligible individuals to purchase health insurance or face a tax penalty.

The one delayed for the big boy employers.

Self-employed Health Insurance Market

Part of the problem may be the debate over how many of us there are.

Bloomberg Businessweek cited varying estimates.

  • Freelancers Union estimates 42 million
  • Lobbying group, It’s My Business estimates there are over 10 million
  • Consultant MBO Partners estimated nearly 18 million
  • A 2010 Intuit survey estimated 40 percent of the workforce would be contingent workers by 2020

I guess you can pick your own estimate.

Managing Health and Money

I am sure there are those who think the federal premium subsidies is reward enough.

Qualifying individuals who purchase coverage through the health insurance marketplace may apply for credits toward premiums.

  • Not all self-employed individuals qualify
  • They make too much money

Most employers recognize the need for healthier behaviors in their workforce to help stem the flow of hemorrhaging health care costs.

Changing behavior starts with the individual – whether that individual is an employee or self-employed. So, why shouldn’t the self-employed have incentives for healthy behaviors?

If you had an incentive to save health care dollars, would you take it? The following are common employer-sponsored incentives.

  • Participation in a wellness program
  • Signing up for weight or disease management programs
  • Performing other program actions – such as health risk assessments or health screenings

The rewards may be a credit toward premiums, lower deductibles or reduced out-of-pocket expenses.

You do something to gain something.

I could do that.

Sure, health reform’s Affordable Care Act covers certain preventive services in full.

  • Imagine a financial incentive for receiving preventive care
  • Combine that with other action-based incentives to reduce premiums

Health Insurance Marketplace

The pipe dream of the health insurance marketplace was an Amazon-type experience.

Amazon sellers understand the lure of a good incentive.

  • Competitive prices
  • Free shipping
  • Unique products
  • Customer loyalty discounts

“…Your customer is the user, not the store.”
A Seller’s Guide To Amazon: Brand Secrets From Hint Water’s Techie CEO
, Forbes

And that user is the individual. With the right incentive, could lower health care costs really happen?

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Notice of Disclaimer –Cathy Miller is not an attorney or health care provider and cannot provide legal or health care advice. The information provided is for your general background only, and is not intended to constitute legal or health care advice as to your specific circumstances. We recommend you review legislation with legal counsel and visit your physician for health care issues.

 

 

BigStock Photo Credit

{ 10 comments… read them below or add one }

Frederick Pilot March 18, 2014 at 9:16 am

One benefit self-employeds do have is favorable tax treatment. They can deduct the cost of health insurance from their incomes. Additional tax benefit be had by purchasing a high deductible, Health Savings Account-compatible plan since contributions to HSAs are tax deductible and distributions are tax exempt for a broad range of qualified medical expenses.

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Cathy Miller March 18, 2014 at 9:32 am

Hi Fred. All true, but I still would like to be able to do something about lowering those costs. I guess you could call it a control issue. ;-)

Plus, I think individuals should be rewarded for healthy behaviors that help control costs, whether they are an employee, business owner or what have you. My 2 cents.
Cathy Miller´s last blog post ..Self-employed Health Insurance: The Painful RealityMy Profile

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Frederick Pilot March 18, 2014 at 10:19 am

Good point, Cathy, about the need for plans in the individual market to factor wellness and lifestyle into premium rating and incentives. I wonder if we’ll see this among coop plans that cater to self-employeds like the Freelancers Union? It could provide plan issuers a competitive selling point while at the same time potentially reducing utilization.

Reply

Cathy Miller March 18, 2014 at 11:35 am

It would be nice, Fred. Now, if we could get Freelancers Union to have health coverage for all states. :-)
Cathy Miller´s last blog post ..Self-employed Health Insurance: The Painful RealityMy Profile

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Kevin H @ Growing Family Benefits March 20, 2014 at 2:05 pm

Access to better benefits is one of the primary selling points of becoming a w2 employee. These positions appeal to people with high security needs.

Those of us pursuing our own destiny have other advantages. Access to benefits is something we sacrifice for the freedom of running our own show. My wife has coverage through her employer, so the choice was much easier for me.
Kevin H @ Growing Family Benefits´s last blog post ..Short Term Disability for Independent ContractorsMy Profile

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Cathy Miller March 20, 2014 at 4:24 pm

You’ll receive no argument from me, Kevin, regarding the other advantages. :-)

However, when it comes to lowering health care costs, I believe to be truly effective it must start at the individual level. And that means incentives (and rewards) for taking action on our health – no matter if we are an employee or self-employed.
Cathy Miller´s last blog post ..Self-employed Health Insurance: The Painful RealityMy Profile

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Frederick Pilot March 20, 2014 at 2:24 pm

Kevin:

One of the goals of the Affordable Care Act is to reduce the quality gap between employer-sponsored health plans and those offered in the individual market by imposing minimum plan value and benefit levels for individual plans. As employer sponsored plans — like much of the individual market — continue to move toward increased cost sharing and higher deducibles, the gap will narrow further.

Another trend is a decrease in employer-sponsored plans offered by small employers in large part due to high premium costs. It remains to be seen if the state exchange SHOP marketplace is able to bring market power to the table to lower small employer premiums.

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Cathy Miller March 20, 2014 at 4:28 pm

Ah, two of my favorite health benefits gurus. ;-) Kevin meet Fred. Fred meet Kevin.

Good points, Fred. It will be very interesting to see how this all shakes out in the end.

Thank you both for sharing your expertise.
Cathy Miller´s last blog post ..Self-employed Health Insurance: The Painful RealityMy Profile

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TC March 28, 2014 at 5:07 am

When people are considering to pursue their dreams of running their own businesses first thing in mind is health insurance. Great, if you could be insured by your spouses plan. Otherwise, you will have to pay the premiums out the pocket. This would be especially problem for start-ups as they will have cash flow problems at the beginning. I know people who defer their plans just because of the health benefits they receive currently through their employers.

I like the point Fred makes about the benefits self employed people have. I guess we need to take the bad with good. There is no satisfaction like running your own successful business.

You are raising a great point about incentives. Definitely, it makes sense for insurers and policyholders if insurance companies offered incentives for looking after yourself. Lower risk, lower premium, right?

Reply

Cathy Miller March 30, 2014 at 1:25 pm

Hi TC. You are right. Health insurance is a major consideration when you are contemplating flying solo. My premium is the highest payment I have every month.

And let’s hope they follow through on the lower risk, lower premium connection. ;-) Thanks for sharing your thoughts, TC.
Cathy Miller´s last blog post ..Will Health Insurance Technology Simplify the Complex?My Profile

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