Health insurance
by Doug Florzak
Sometimes, self-employed people experience difficulty purchasing health insurance. As an independent consultant, you probably never get the economies of scale that a large company does when it purchases health insurance for its employees. Options for independent consultants seeking health insurance have improved over the last few years as some commercial insurers and HMOs start to provide more products designed for the self-employed. Some common sources of health insurance for independent consultants include COBRA, a spouse's policy, individual policies, commercial insurers, professional membership group policies, and state legislated health care plans.
COBRA
If you recently left a job with a company that employed 20 or more workers, you qualify for coverage under COBRA. COBRA stands for Consolidated Omnibus Budget Reconciliation Act, which took effect on April 7, 1986. It allows you to continue under your previous company's group health insurance plan for up to 18 months after you leave the company. To use this plan, you must pay the company's premiums plus up to 2 percent for administrative expenses. However, these premiums are often less than those for an individual policy, making COBRA a good deal.
Make sure you pay the premiums on time. The industry estimates that an employee or dependent receives $2 in benefits for each $1 of premium paid under COBRA. Because of this, employers use late payment of premiums as an excuse to discontinue COBRA coverage for employees.
You should probably only use COBRA as a temporary "filler" policy until you find a permanent health care policy. Insurance experts suggest that you apply for permanent health insurance at least eight weeks before your COBRA runs out because it usually takes that long for the company underwriting the COBRA policy to obtain and transfer your medical records from doctors and hospitals.
Spouse's policy
If you are married and your spouse has a job that provides health insurance to the families of its employees, you and the rest of your family can be added to your spouse's policy. This is probably your least expensive option because you take advantage of your spouses company's group rate.
Individual policies
The most ubiquitous source of individual policies is nonprofit Blue Cross/Blue Shield. Blue Cross is available nationwide and will sell a policy to a self-employed person. However, you will pay more than an employee of a large company contracting to Blue Cross for their health insurance.
Commercial insurers
Commercial insurers typically service only larger businesses with 50 or more employees. Some do provide plans for one-person businesses.
Professional membership group policies
Many large associations and professional groups select an insurance company to provide discount or group insurance for their members. In addition to these organizations, your local chamber of commerce may offer health insurance plans to its members. When you consider these plans, make sure they are offered by stable companies.
State legislated health care plans
Some states, such as Hawaii, Vermont, Oregon, and Florida, provide "universal" health plans that offer affordable health insurance to its residents. Other states are considering similar plans. Check with your state's government agencies to see if you qualify for a state health insurance plan and compare that plan to other options available to you.
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