If you are thinking about going into business for yourself in the United States, health insurance becomes a front-and-center concern. Employer group plans are still the gold standard of medical coverage. If you have an entrepreneurial streak that can no longer stay hidden--or if you are pushed into self-employment by a job loss--there are options for health insurance.
Benefits
The benefits of having health insurance include ensuring access to medical treatment and protecting yourself and your family from financial ruin. Most bankruptcies in the United States stem from medical debt, according to research published by in 2009 by Dr. David Himmelstein and several of his colleagues. According to an article in the American Journal of Medicine, they found that 63 percent of bankruptcies were caused by medical debt.
Types
Health plans available to self-employed people come in several varieties. An HMO, or health maintenance organization, plan allows you to get care only from certain "in-network" hospital, doctor's offices and other facilities. A PPO, or preferred provider organization, is similar but more permissive: You can visit either in-network or out-of-network providers, but you will pay more from your own pocket if you go out-of-network. HDHPs, or high-deductible health plans, tout lower premiums than standard plans, but they have higher deductibles, meaning you may have to pay several thousand dollars out-of-pocket in a given year before your insurance kicks in.
Cost
Cost is the major issue when you must buy your own health insurance. Employers who offer health coverage frequently pay 75 to 80 percent of the premium, according to the Health Insurance Resource Center. When you are on your own, you must "cough up a lot of dough for what will feel like inferior health coverage," according to Smart Money magazine. The average price a family will pay for a year of coverage is $12,300, according to a report released in October 2009 by PricewaterhouseCoopers for America's Health Insurance Plans.
Considerations
If you are just leaving an employer for the world of self-employment, you can consider continuing your health coverage through COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1985. It permits former employees to continue their employee health benefits for as long as 18 months after they leave their position, though the employer no longer pays a portion of the premium, according to the Health Insurance Resource Center. This type of coverage may or may not save money compared with buying insurance on the open market. At any rate, it gives you time to shop around.
Warnings
"Preexisting conditions" can pose a big problem when you are looking for a health plan. While group plans cannot exclude you or charge you higher rates based on your medical history, private plans can, at least in many states, according to Smart Money. This is a factor to think about before leaving a job to strike out on your own. "If they look at your application and see something they don't like, a $600 [a month] policy could go to $850," Robert Bland, CEO of Insure.com, said of insurance companies.
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