I thought I had an easy task when my wife asked me to find our family a health insurance policy before she left her full-time job to start her own business. After all, I've spent the last 16 years writing about health insurance for readers of Kiplinger's, Reuters, various AARP publications and others.
I envisioned reviewing stories I'd written on the subject, calling a couple of carriers to compare rates and submitting an application, the entire process informed by the subtle understandings of the field I'd developed over the years. A three-hour task, tops.
In the end, I spent some 30 hours poring over insurance literature and policies, questioning insurance company customer service reps and Maryland regulators, calculating all the angles with brokers and other experts, talking to my accountant and calling the IRS.
While my family now has what some like to call "affordable" health coverage, I still lie awake some nights thinking about the gaps in the policy, the costs we may incur and what would happen should my wife, one of our two kids or I get sick or hurt.
Only now do I truly appreciate the formidable, costly, baffling task facing the millions of people who try to find health coverage when they lose a job, retire early, start their own business or work in a job without health insurance.
Self-employment is an exciting proposition. But it can mean paying full freight for health insurance, a figure most people never encounter since their employers often pay a large portion of their premiums. Policies can cost as little as $1,000 to more than $10,000 per person a year. And that's for healthy individuals.
"If you're young and healthy and don't need much care, this is a market for you," says Karen Pollitz, project director of the Georgetown University Health Policy Institute. "But most people who try to buy individual health insurance have difficulty getting coverage because of availability, affordability and adequacy of coverage."
Buying health insurance in the individual market can be risky. ("Individual" policies can cover more than one person; the term merely indicates that the buyer is not part of a group whose health risks are being pooled.) Double-digit annual premium increases are the norm, policyholders lack many protections enjoyed by those who are covered through employers, and the coverage pales in comparison with group insurance. If you're sick, either before you enroll or when it's time to renew your coverage, the individual market is even harder on your wallet and your options are severely limited.
"The current system is discriminatory in my view for individuals who are self-employed, on their own or in a small group," says Lawrence Mirel, the District's insurance commissioner. "That's got to be fixed. It's just not right."
Our family had been enrolled in group health insurance through the University of Maryland School of Medicine, where my wife was a member of the full-time faculty. We paid about $2,000 a year for a CareFirst BlueCross BlueShield plan allowing us to see any doctor we desired. We knew that was a far better deal than I, a self-employed writer, could get.
My wife's decision to start a private psychotherapy practice required her to drop down to part-time status. This meant she could retain our health coverage, but the university would no longer subsidize it. We would be responsible for the full cost, about $10,000 a year.
Reluctant to shoulder such an expense as my wife begins to build her practice, we thought there would be acceptable alternatives, even if we had to settle for somewhat inferior coverage.
Pollitz knows better. In fact, she has a list of horror stories about people who can't get coverage or who become priced out of the individual market because of health conditions.
"In the individual market," she says, "expect high-cost sharing, no maternity benefits, very little coverage for prescription drugs, no to little coverage for mental health care or substance abuse and limited rehabilitative benefits."
We did get some good news: Because I'm self-employed, I can deduct the entire premium for family health insurance as a business expense.
"If your health insurance is $3,000 for the year and you pay for that on an after-tax basis, then it costs you $3,000 a year," says Alice Orzechowski, an accountant and partner of OAO Mohn & Allen CPAs in Frederick. "However, should you be able to pay for it on a pre-tax basis [as the self-employed can] assuming you are in the combined federal/state 40 percent tax bracket, then it costs you $1,800. That's a big difference."
Unlike the self-employed, many people who buy individual insurance -- those whose employers don't offer coverage, for example -- cannot claim this tax benefit. But even for the self-employed there's a catch: The deduction applies only to premiums for individual policies, not for employer-sponsored plans like my wife's.
That helped convince us to opt for an individual policy. We also figured that since our family is healthy, we would have decent choices at reasonable costs.
But we're still playing the odds. And that's stressful, particularly as we ponder what-if scenarios about illness striking. We also know that we'll face rising rates each year and risk getting pushed out of the market should one of us become sick or injured.
"It's lousy that people have to make these choices," Pollitz says. "It puts a real damper on the entrepreneurial spirit."
Let's Go Shopping
The individual market includes many high-deductible policies. With health care costs rising, insurers are reducing much "first-dollar" coverage to keep premiums affordable. The result: Policyholders pay more upfront costs before any benefits begin -- $750, say, as opposed to the previously common $250.
We nearly chose Mamsi's Sole Proprietor PPO option, which had decent coverage for a $501 monthly premium ($6,012/year). But considering that we could be on the hook for up to $6,800 more (including a $1,000 deductible) every year in out-of-pocket costs, we picked a plan with a lower premium.
We opted for CareFirst's Personal Comp policy. Less comprehensive than Mamsi's PPO, the CareFirst policy costs $306/month ($3,672/year) and is fairly typical of what the individual market offers.
The policy picks up 80 percent of the covered costs, after we meet the deductible ($1,000 per family member, or $2,000 for the family overall). We pay 20 percent for most services, including hospitalization, until our out-of-pocket costs reach $2,500 per person or $10,000 for the whole family. The policy picks up 100 percent of costs after that.
The CareFirst plan has a paltry prescription drug benefit -- an annual $500 per person after the deductible is met.
As with most individual coverage, vision and dental is not covered, but you can buy into small discounted provider networks.
Besides the comparatively low premiums, we also liked the plan's broad network and strong coverage for preventive care: Well-child and adult exams and OB/GYN visits cost only $10 each and are not subject to the deductible. (In a typical year, most of our doctor visits are preventive in nature.)
We also felt somewhat relieved that we, unlike most people in the individual market, have a couple safety nets. Should one of us get seriously sick, chances are good that our rates would jump enormously. In that event, we could resume our group coverage through the university -- albeit at full cost and with no tax deduction.
And being Marylanders, we could enroll in Maryland Health Insurance Plan (MHIP), one of the nation's best providers of last resort. So-called uninsurables can get coverage for their conditions, and the rates are better than in most so-called high-risk pools.
Our world would change dramatically should one of us become chronically ill. Our financial security could be at risk, and the entrepreneurial spirit in our family could be quashed.
It's a sad fact that in today's climate, it's health insurance that can stand between many people and their dreams.
Christopher J. Gearon is a Silver-Spring based freelance writer specializing in health care and financial issues.