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Comment by courtewing | Hacker News Reader

Whenever I think about "risk" in starting your own business, my mind always wonders to health insurance (living in the US). Individual health insurance is of course an option, but many of the legal protections that are in place for group health insurance plans are not applicable to individual health insurance. For example, when you move directly from one group health insurance plan to another, the latter plan cannot claim a pre-existing condition exemption for an illness that was identified during your previous coverage. If you were moving from an individual insurance plan to a group plan, the same protection is not available.

This is a huge issue for me as I value my health above all but my family (certainly leaps and bounds above my career aspirations).

I haven't looked very much into this, but I'd be very intrigued to hear how U.S. startup founders address or mitigate the risks associated with health insurance in their early-stage ventures.

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It's always a little weird when I see the topic of health insurance come up (and it comes up a lot). When I hear this argument, it's very apparent that this is a large emotional risk, but not a large financial one. In fact, this fear is a very illogical one compared to other risks.

Let's quantify real quick so we can remove the emotional barriers and just deal in numbers. According to AHIP's 2011 survey, average monthly cost of family insurance for a firm with less than 50 employees is $13,400. How does that compared to the risk of losing a salary of $50k, $75k, $100k+? (Btw, any firm with 2+ employees can qualify for group plans)

The problem here is that leaving work and thus losing that salary is a form of freedom for most. Again, this is our emotions playing tricks on us. Both can be quantified, but one is villainized and the other martyrized.

I don't think it is fair to compare health insurance with salary, they're completely different animals.

#1: You cannot plan for the unexpected

When you quit your job to start a business, you're planning to lose your existing salary. If you've planned well, your living expenses (food, rent, utilities, etc) are known, so you can plan for them.

You don't plan to get sick or hurt, and even if you did, it would be very difficult, if not impossible, to accurately estimate how much it will cost you to get better. You pay for health insurance to help you pay for the unexpected, so its value is inherently volatile.

#2: You cannot "go back" if the unexpected bites you

If you're looking to start a business, chances are you are highly skilled, personable, and/or ambitious. These are all traits that lend themselves to being abnormally hirable, so if things didn't work out the way you had hoped, you can likely get back into the workforce with a similar salary from when you left. And if that doesn't work out, you still have a better shot than most at a myriad of other job opportunities that at least pay you something worth working for.

If you get sick and you have insufficient health insurance, there are very few ways to get around it. If you were diagnosed with cancer a day after you quit your job, and your current individual provider was unwilling to provide all of the necessary treatment, you're out of luck. That's the ball game. You can't just back out of your startup venture and go back to work to fix the problem.

#3: You can die

Your salary can affect your quality of life, but with personal and societal safety nets, you're not going to die just because you're poor.

The U.S. has no safety net that ensures you will be provided with all of the care you need to not die even from curable or treatable conditions. Medicaid is about the closest thing to such a net, but it doesn't cover every person nor every thing. No personal safety net will help you here either (unless you know a few billionaires that have enough of an interest in you being alive).

They're the same if you just put a dollar value on them. You can buy group insurance easily as a startup. Forget about everything else and just quantify it as money. In this case, you'd realize both risks when you start a company so the probability of the risk is 100%. You'd simply take the cost and multiply by 1 (probability) to quantify the risk.

#1: as I wrote earlier, you buy the insurance and it's simply a fixed cost.

#2: you have insurance so this point is invalid (you have access to cobra which is retroactive in case insurance has not been set up).

#3: Again, you have insurance.

I'm not sure why you're proposing to not purchase insurance because that's a completely different topic and discussion. My point was that the cost of insurance is easily quantified and is in fact much lower than the cost of not receiving a salary. It's about comparing apples to apples and honestly your argument really speaks to my original point that people tend to be overly emotional when evaluating insurance.

Here in the UK, it was something that I didn't have to worry about.

Which was a good thing. Shortly after I had committed to my start-up my wife became pregnant, with twins, and ended up with a reasonably lengthy stay in hospital due to complications. My start up ultimately failed hard, and my savings were wiped out. But her and my health was one thing we didn't need to worry about.

This is absolutely a concern, and there's no one answer to the problem. A lot of entrepreneurs have employed spouses. A lot buy (relatively) cheap catastrophic plans. A lot (myself among them) simply skip health insurance and take our chances. It helps being relatively young and healthy, but I don't go skiing or ride my motorcycle as much as I used to.

If you have a family to support, health issues, a mortgage, even car payments, the risk of failing is higher. Everything takes longer than you expect, and IMHO the best way to improve your odds is to make your "runway" as long as possible. Halve the burn rate, double the runway. It sucks to go back to living like a student in my late 30s, but it's vastly more satisfying than working for someone else.

+1 this comment. I have recently had an experience with a kid which reminded of the value of this benefit. What other options have founders exercised to mitigate this risk for their families in a cost effective manner?

Get catastrophic insurance if you have the cushion for the full deductible.

When I quit Cisco to work on my startup I was shocked at how much was coming out of my paycheck that I simply didn't notice. When my wife and I shopped around for individual insurance we realized that we could get very decent insurance for a fraction of that price. We opted for the even cheaper catastrophic insurance. Even though we hit the full deductible last year because we had a baby we're still ahead where we'd be paying the premium for my Cisco insurance.

Believe it or not, if you're even somewhat healthy individual insurance is not as expensive as you're led to believe. Or, perhaps, group insurance is more expensive than you've been led to believe :)

Yes. This is where having a spouse with fantastic benefits comes in handy.

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