You Can Get Health Coverage
Forget the horror stories. Policies are available even if you're sick or retire early.
By Kimberly Lankford, Contributing Editor
From Kiplinger's Personal Finance magazine, August 2007
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As the debate over health care heats up, you'll hear plenty of tales about people who can't get insurance. Don't believe everything you hear.
Yes, there are horror stories, but most of them should have happy endings. Buying affordable health insurance is more complicated if you don't have coverage through your employer. But the truth is that most people can find coverage on their own. And that's the case even if you're in a tough situation -- you have a medical condition, for example, or you want to retire early and aren't eligible for Medicare.
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Learn here how real people solved their personal health-insurance crises. If you find yourself in a similar situation, don't wait for your state government or a presidential candidate to come to your rescue. Do what these people did and take matters into your own hands: Shop smart, make your case, and take advantage of laws already on the books.
Consult a broker
Problem: You're self-employed.
When he worked for an auto- and homeowners-insurance brokerage, Mike Federau, now 47, paid just $120 per month for coverage on himself and his son, Austin. So when he left the insurance business to become a self-employed real estate agent in Punta Gorda, Fla., he was in for a shock.
Federau initially kept his former employer's coverage through COBRA, the federal law that requires an employer with 20 or more employees to let you stay on its health-insurance plan for up to 18 months after you leave your job. But you need to pay both the employer's and the employee's share of the cost. And without the employer subsidy, Federau's monthly premium jumped to $700.
Federau contacted Wayne Sakamoto, a health-insurance broker in Naples, Fla. Sakamoto was able to find coverage for father and son for just $277 per month. And because Federau is self-employed, the premiums are tax-deductible.
To keep his premiums low, Federau chose a policy with a $5,000 deductible. Like other types of insurance, he says, "health coverage was never meant to pay dollar one. It was meant to offer protection in a catastrophe." So far, his strategy is working. He and Austin, now 8, have had few medical expenses, and the policy provides one free physical per year -- worth several hundred dollars -- for each of them.
The high-deductible policy also makes Federau eligible for a health savings account, in which he can invest tax-deductible money (up to $5,650 for a family and $2,850 for individuals in 2007). He can withdraw money tax-free at any time to pay medical expenses that aren't covered by his insurance. Meanwhile, the money is parked in an interest-bearing account (go to HSAinsider.com or HSAfinder.com for more on health savings accounts).
Self-employed individuals may have other options. In some states, businesses with just one or two employees qualify for group rates, which can be lower than individual premiums. Also look into coverage through established trade associations, but avoid groups created just to sell insurance. Their initial low premiums could jump in the future. Go to kiplinger.com/money/insurance for links to state insurance departments, where you can check small-group rules and an insurer's complaint record.
When Sherry Gifford, 58, and her husband, Cale Nelson, 63, started a marine business in Marathon, Fla., they were bombarded by salespeople pitching association health-insurance policies. But after a year or two, premiums would jump by 20% or more. Healthy individuals would drop out, leaving the association primarily with sick people -- what insurers call an "actuarial death spiral."
Gifford eventually found a high- deductible policy through Golden Rule that charges $577 per month for her and her husband. They also max out their health savings account, plus a catch-up contribution of $800 for people age 55 and older, and so far have amassed about $8,000 in their HSA.