Cutting Health Insurance Costs

by Tony Novak

Surveys of self-employed individuals consistently show that one of their major concerns is the ability to buy affordable health insurance. One in 4 self-employed persons has no health insurance today even tough more than 70% of these people could afford to buy high quality health insurance if they had an effective buying strategy.

1. Have a budget and set realistic expectations. Realize that the purpose of insurance is to cover unexpected and otherwise unmanageable expenses. Most good plans cover "ordinary and necessary medical expenses" but not your health club membership. Look for coverage that provides protection but avoid being drawn in by the marketing sizzle. Do not buy health insurance with the primary intention of picking up the cost of your existing ordinary medical expenses like prescriptions, routine dental care and annual check-ups. Health plans exist for almost every budget. Remember that no one is excluded from receiving medical care for an acute condition because of the type of their health insurance plan, but rather medical treatment may be denied because they dont have any insurance coverage at all.

2. Realize that there are trade-offs in every health plan. The lowest priced high quality health insurance plans excluded coverage for pre-existing medical conditions and require periodic re-enrollment. It is often better to take the less expensive insurance any pay for small uncovered expenses yourself. But if you need to find "full takeover" coverage, then you cannot expect to be offered the insurers lowest rating.

3. Think short term. Most individual health insurance policies for self-employed persons actually stay in force less than a year. Buy the plan that offers you the best deal right now and do not worry about whether it will be available in a year. In 12 months, a whole new generation of health plans will be available. It would not be smart to keep the same plan for more than two years because new plans are evolving rapidly. A plan that you bought more than 2 years old would not likely represent the best value for you today.

4. Use student medical plans and foreign travel plans if you qualify. These plans offer better deals than traditional coverage.

5. Choose a higher deductible. By taking a $1000 deductible, you will save more than $1000 in premium payments over a years time. This should be an easy decision from a mathematical viewpoint, but still many people buy policies with a low deductible. It makes no financial sense to pay an insurance company $1000 in premiums for medical care that you could buy for $600 cash.

6. Choose indemnity type coverage and avoid HMOs. This lets you and the doctor that you choose maintain control of your own medical care. This saves money in the long run by allowing the best course of treatment from the outset of any medical condition.

7. Use the Internet. Technology now allow for online pricing and enrollment with policies issued within 24 hours. Savings have resulted in lower premium prices. Some plans offer premiums as low as $25 per month for catastrophic coverage for young people.

8. Avoid the scams. Unfortunately, self-employed individuals are a prime target market of numerous health plan marketing scams. State insurance departments continuously shut down disreputable plans, but new ones sprout up just as quickly. Well-established and reputable health plans are obtained from well-established and reputable distributors. Good health plans do not use multi-level marketing schemes. All individuals handling your health plans enrollment should be licensed, bonded and insured. Beware of individuals who claim that they do not need an insurance license in your state or can not provide evidence of errors and omission coverage or a bond issued by an insurance company. Remember the old adage "if it sounds too good to be true…". This certainly applies when shopping for health insurance.

Tony Novak, MBA, MT is a writer and financial adviser in Narberth, PA. His businesses MedSave.com and Freedom Benefits Association provide online benefits enrollment to individuals and businesses in 47 states.