Managing Your Own Benefits
Self-employment also means handling your own health care.
Reviewed By Michael Smith Workers leaving their 9-to-5 jobs to set up shop for themselves often look forward to the freedom of being their own bosses, setting their own hours, and charting their own courses.
Then sometime between the office goodbye party and the final paycheck, reality hits. Self-employed workers are also their own benefits managers, responsible for finding and paying for their own health insurance and any other benefits they may need. Where to start?
Keeping the Company Plan
In its 1998 survey, the U.S. Department of Labor's Bureau of Labor Statistics found that more than 10 million people are self-employed, either full-time or part-time.
The soon-to-be self-employed who are leaving a job with health care benefits may be covered under a federal law commonly called COBRA (the Consolidated Omnibus Budget Reconcilation Act of 1985). Under this act, group health plans sponsored by employers with 20 or more workers must let ex-employees continue their coverage for up to 18 months, although the worker pays the entire premium and it can be pricey.
Another option is to investigate whether you can be added to your spouse's plan.
Striking Out on Your Own
If neither of these applies to you, begin your research by examining your health insurance needs, advises Gene Fairbrother, a spokesman for the National Association for the Self-Employed. Look at what health care services you've used in the past, and figure out what you may need in the future. "When it comes to health insurance you can't just plan for today," he says.
It's also a good idea to research the market in your state, and find out what your state law requires of insurance carriers, says Madelyn Flannagan, spokeswoman for the Independent Insurance Agents of America, Inc., a national trade group in Alexandria, VA. Trends, rates, and options vary greatly from state to state, Flannagan says. Consider a call to your state department of insurance, or check out its Web site.
An Array of Options
As your own boss, you're not limited by what any one company offers in the way of health plans. You can choose whatever plan works best for you: traditional fee-for-service or a managed care plan. Another potential option is a medical savings account, says Flannagan, but this route isn't chosen often by newly self-employed workers because of the relatively high cost.
Web sites -- such as www.quotesmith.com, among others -- can yield instant quotes and give you an idea of rates based on your location, age, and other factors. Your state department of insurance may be able to provide you with names of companies that sell individual policies.
"Talk to friends and business associates who are also self employed," Fairbrother suggests. Ask them what works and what doesn't.
"Look also at organizations you may belong to," Flannagan says. These might offer group plans, which are generally less expensive than individual ones. One often-overlooked source of insurance is your college alumni organization. Call your school, or the Alumni Insurance Agency and Administrators at 800-726-2422.
You might also ask the agent who handles your homeowners' or car insurance if they write health insurance. According to Flannagan, most do. If your agent has never mentioned this, there may be a good reason: Commissions are usually lower, so your agent may be less motivated to market the product.
Flannagan cautions self-employed workers to ask up front about family coverage if they have dependents. Some plans, she says, don't cover spouses and children.
Contact at least three to five companies so you can do some comparison shopping, says Fairbrother. In general, expect to pay more for fee-for-service plans than managed care plans. Be aware that some managed care plans increase the premium as you change age brackets, perhaps every 10 years.
Researching the Plans
Before deciding, consider doing some research on the company's rating. A.M. Best and Standard and Poor's offer rating information. Another group, the National Committee for Quality Assurance, posts report cards on various plans. The Health Insurance Association of America also offers many tips on its Web site about buying health insurance.
Reviewed by Michael W. Smith, MD, April 2002.
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