By Carly Schulaka
If you are a sole proprietor or you own a planning firm with a small staff, you may be faced with the dilemma of qualifying and affording quality health insurance.
Many independent financial planners do not benefit from traditional large group plans heavily subsidized by an employer. And group plans can be difficult for professional associations to acquire for their members in a way that ensures consistent service for all members. But there are some options for entrepreneurs.
The Price Is Right?
Price is often the biggest factor when considering your options. Nationwide, non-group premiums averaged $218 a month for single coverage and $483 for family plans in 2007, the latest figures available from America's Health Insurance Plans (AHIP), an association representing more than 1,000 health insurers.
Monthly premiums for small group plans-companies with 50 or fewer employees-averaged $346 for single coverage and $913 for family coverage in 2008, according to AHIP. Keep in mind that small group premiums are typically shared between employer and employee, and federal law prohibits small group plans from being denied coverage due to the health status of employees or their dependents, driving up premiums but ensuring coverage for everyone. The fact that group plans are "guaranteed issue" is important, considering 11.3 percent of medically underwritten individual health insurance applicants were denied coverage in 2007, according to AHIP.
Create a Group
Most states define a "small group" as an employer with two to 50 employees. However, some states allow self-employed groups of one. According to AHIP, those states (see sidebar for details) have guaranteed issue rules and community ratings, which ban age-based premiums. However, AHIP reports that states with these rules tend to have higher-than-average premiums. So if you are a sole proprietor in your 50s, 60s or older with pre-existing health conditions, you will not be denied coverage, but you'll pay more for it.
Rules for qualifying as a group vary across the country. Contact your state's department of insurance or health institute for specifics. Check out the Council for Affordable Health Insurance (www.cahi.org) for a handy list of state insurance links and other helpful consumer information. Large insurance companies including Kaiser Permanente and Anthem Blue Cross and Blue Shield have departments dedicated to small business coverage. Do your research, but consider working with a qualified insurance broker who specializes in employee benefits and is well versed in your state's rules who can offer several options for you and your staff.
When applying for group coverage, be prepared to prove your group status. That could mean supplying complete business tax returns or a Schedule C, depending on your state.
Combine an HSA With a High-Deductible Plan
Weigh the costs of a group plan against a high-deductible plan combined with a health savings account (HSA). Depending on the health of you and your employees, the HSA option could prove more affordable. Generally, the younger and healthier you are, the more attractive an HSA is.
The high-deductible plan is designed to cover large hospital bills only. Be prepared to pay the first $1,100 to $5,000 in medical bills out-of-pocket before the high-deductible plan kicks in. Until you meet the deductible, health care costs are paid out of the HSA, an investment account from which money is withdrawn tax-free for medical care. HSAs are portable; you and your employees can take it with you when you switch jobs or retire. If you don't need the money for medical care, it accumulates with tax-free interest until retirement, when you can withdraw it for any purpose and pay normal income taxes.
When shopping for an HSA/high-deductible plan, work with an insurance professional who specializes in these plans to be sure you get a high-deductible plan that qualifies for an HSA. Also, be aware of some of the potential pitfalls of HSAs, including possible high out-of-pocket costs and any caps on doctor's visits or lifetime care.
According to AHIP, monthly premiums for individual HSA/high-deductible plans averaged $234 for single policies and $448 for family policies in 2008. These policies also came with an average annual deductible of $3,005 for single polices and $5,920 for family policies.
Average monthly premiums for small-group HSA/high-deductible plans are higher, at $287 for single policies and $753 for family policies, with comparatively lower annual deductibles of $2,091 for single polices and $3,764 for family policies.
Hold Out for the Government
At press time, President Obama was anxiously awaiting a health care reform bill that would meet his goal of extending health insurance to 45 million Americans who lack it. Democratic leaders proposed a plan that would require individuals and businesses to contribute to health insurance costs, surtax high-income earners and create government-sponsored health insurance options to compete with private insurers.
Although Obama is pushing for a bill before the congressional recess in August, the issue may be shelved until the fall. In the meantime, connect with an insurance professional to weigh your options.
Carly Schulaka is the managing editor of Practice Management Solutions. Contact her at Carly.Schulaka@FPAnet.org.
Group of One
The following states allow guaranteed issue policies for self-employed groups of one. Special rules may apply. See source for details.