How to Choose Health Insurance – Startup Edition
blog.getsimplyinsured.com
blog.getsimplyinsured.com
COBRA charges the same premium as the group insurance you had with your employer, perhaps with a small surcharge tacked on. It's more out of your pocket simply because your employer isn't pitching in anymore.
If you're young and healthy, COBRA may cost more, since it's a rate for a group that probably includes older and sicker people. You're healthier than the average person in the group so individual insurance is cheaper.
But if you're older or sicker yourself, going with individual insurance means you no longer have those healthy young people propping up your insurer's profits, so you'll pay more with individual insurance. A friend of mine was charged quite a bit more, and wasn't even especially unhealthy.
Of course all this will change at the beginning of 2014.
Or at least that's my understanding from my CPA who was trying to talk me out of using COBRA coverage. That conversation was before AHCA ("Obamacare") passed.
If the ban on precondition screening starts in 2014, perhaps it's safe to start COBRA this coming June.
Here's a timeline of Affordable Care Act provisions: http://www.healthcare.gov/law/timeline/
Note that the law not only ensures you can get insurance, it prohibits insurers from charging higher premiums for people with preexisting conditions.
More info: http://www.insurance.ca.gov/0100-consumers/0070-health-issue...
I posted a couple of ca.gov links elsewhere in the comments with more information.
As an independent software developer with Type 1 Diabetes, COBRA from my previous employer is my only option. Fortunately, California extends the national 18 month maximum duration to 36 months. Unfortunately, my COBRA will run out 4 months before 2014, so I'll need to figure something out before then.
For example, when you apply for a Blue Shield individual plan, you have three options:
1) Answer all the medical questions and apply for underwritten coverage.
2) Skip all the medical questions and apply for a guaranteed issue plan only (if you meet the 18 month and COBRA requirements).
3) Apply for both simultaneously: answer the medical questions and hope to get underwritten coverage, but also request automatic guaranteed issue if they decline the underwritten plan. This is the option I'd recommend of course. (Even with a pre-existing condition, it's possible that they may still offer an underwritten plan in a higher rate tier, which would still be less than the guaranteed issue plan.)
More information from the California Department of Managed Health Care:
I was lazy about getting my company's own insurance and contacted my former employer (Activision Blizzard) about how to get Cal-COBRA coverage.
Turns out I wasn't eligible, since their health plan is self-insured. Whoops, I didn't know that — who would?
I managed to line up coverage to avoid a gap, but I imagine a lot of people are caught by surprise by this exclusion. Details here:
http://www.insurance.ca.gov/0100-consumers/0060-information-...
I wouldn't of struck out on my own if it didn't exist.
Obviously under 26 is different, or over 65. Or military or veteran. Exploit spousal insurance if that works for you too.
Otherwise, I care about being able to see my current doctor or choice of great doctors, which is where Kaiser totally fails, and where HealthNet also is inferior to the better plans (blue shield or anthem).
High deductible plans (for HSA) come out pretty well; I paid $90-118/mo for mine at 31-33 (big increases the last 2y due to 100% preventive coverage and no lifetime limits, so it was easy to cost the insurer $300/y on a catastrophic plan....)
Insurers underwrite applicants in the individual market, meaning that for someone with preexisting medical conditions, these options will either:
1. Simply not be offered (they will deny you coverage)
2. Offer coverage, but exclude coverage of any preexisting conditions (usually for at least 6 months)
3. Charge a much higher premium rate than those shown here
Not to be harsh, but this analysis is dangerously misleading. Do they have domain knowledge of this area?
The premiums bear this out.
Also: Going with some mickey mouse plan is essentially a bet that you'll never be diagnosed with anything that is chronic during coverage. My wife manage to strike it rich with an autoimmune disease, and now we essentially cannot move nor change plans in any way.
(ACA will help a lot, but I still wouldn't put it past the assholes in DC to repeal it before it helps us.)
To get a feeling for the problem, consider that common reproductive health issues in women, like endometriosis or uterine fibroids, are both extremely prevalent and actuarially unacceptable to insurers (they correlate with expensive surgical interventions, which aren't common but are common enough for insurers to wave women off).
FSAs are only available to people choosing an insurance plan from their employer. So, they're not applicable to the situation we cover in this article where somebody is buying insurance individually.
It looks like FSA caps are reduced from a previously employer-determined limit (often e.g. $5000) to a federally mandated $2500, but HSA caps are increasing from $3100 to $3250 (for individuals).
None of this is directly an argument against public health care, since obviously there's a benefit to universal availability in both education and health, but certainly it wouldn't be a panacea.
The same isn't true for healthcare. This bizarre system of tying your healthcare to your job means even middle and high income families don't have any peace of mind when it comes to healthcare. Heck, my wife and I are a high income couple and have expensive health insurance, and we are still completely paranoid about all the ways the insurers could find to screw us over, especially now that we're about to have a baby. Every time my wife goes to a pre-natal visit, she ends up fighting with the insurer about how something was coded, etc.
Sorry that this sounds like an ad, but we don't all live in fear of our health plans. (I dislike the term "insurer", since what they sell stopped behaving like insurance a long time ago.)
Even with the "high income" surcharge here for health-care, it's less than $1000 a year for an individual. Since it's deducted from your income along with regular payroll taxes, you don't even have to pay for dependents. They're covered under their own plan which is basically free until they start earning and paying deductions of their own.
In a start-up environment, $12,000 a year is not a lease on a Mercedes, it's the difference between your business floundering in obscurity and affording a few key networking trips, or the difference between living in a bedbug infested hellhole or having a decent apartment.
There are private insurance plans for exceptional circumstances, but these often over-lap with other policies to such a degree they're basically a luxury offered by companies to entice workers. The only real perk to them is the dental and optical coverage that isn't covered by the standard health-care system.
There's also regulated costs, which makes it cheaper across the board. Per-capita spending is actually only about 50% what it is in the USA (http://en.wikipedia.org/wiki/List_of_countries_by_total_heal...).
Factoring in that, the net cost might be subsidized by other taxes by at most ~$2000 more a year. Part of this is paid by the employer on behalf of the employee and isn't listed as a deduction. The rest is subsidies from the federal level of government.
The thing that makes this more affordable for people on limited incomes is how it's tiered, not a fixed price for everyone. If you're an entrepreneur barely making an income, you don't pay much.
I would point out that these kinds of things are about trade offs. As a society we are much worse off without a national education offering, even if it has significant problems to overcome. At this point in time, private health insurance tied to employment have clearly failed as a way for US society to have decent health care, as we spend more for lower quality service than most other nations in our economic class. Universal health care programs are not so much about a panacea, but something that doesn't suck as bad.
The program is called Healthy SF. If you're presently living in SF and not covered, check the enrollment site and get registered right away.
The Guard is not for everyone, but it has been great for me, on so many different levels. It has never substantially interfered with the three start-ups I've been in.
The inexpensive health insurance is a huge comfort for the periods where I work independently or before we get funding: it's like a massive drop in burn rate!
There are cyber opportunities (variable by geography), so talk to your local recruiter.
Like an FSA, pre-tax money goes into an HSA, and you can withdraw from it tax-free for qualifying medical expenses. You can also make taxable withdrawals with no penalty for non-medical purposes after age 65.
Unlike an FSA, an HSA is a real savings account and not a use-it-or-lose-it account. You own the money in it; it doesn't vanish at the end of the year.
You don't have to get an HSA from the same provider as your medical plan. You simply need to get an HSA-compatible medical plan like the ones mentioned in the article, and then you can open an HSA anywhere they are offered.
Once you have that plan, you can open the HSA any time you want. There is no "enrollment period" for an HSA when you open it separately from your medical plan.
You don't have to get an HSA that is "managed" in the way that most FSAs are. Instead, you can get an HSA that works like a checking account: You have your own checkbook and an ATM card that works at medical providers. Rather than submitting claim forms and getting reimbursed, you simply write checks or use the ATM card to pay your medical bills. Or if you use other funds (checking, credit card, whatever) to pay a medical bill, you can write a check to yourself from your HSA to reimburse yourself.
With this type of HSA, you don't have to decide ahead of time how much you will be putting into it. You get deposit slips or a way to make online deposits, and it's up to you to decide how much and how often to contribute, subject to the maximum contribution limits.
If you're maxing out your other retirement account options, you can contribute to your HSA but pay your medical expenses out-of-pocket, so your HSA balance grows like another IRA.
This kind of HSA is also portable: if you change insurance companies or plans, you can keep the same HSA instead of having to transfer it to your new provider. As long as your new medical plan is still HSA-compatible, you can keep contributing to the HSA.
If you change to a medical plan that is no longer HSA-compatible, you can keep your HSA and continue to use it for medical expenses, or let the money sit in it as long as you want. You just can't make additional contributions to the HSA.
I use HSA Bank for my HSA: http://www.hsabank.com/ At the time I opened my HSA many years ago, they were one of the few options for the type of self-managed HSA I wanted. I looked at other banks as well, but they were offering traditional managed HSAs where I'd have to deal with reimbursement forms. I would hope there are a number of other options for self-managed HSAs these days, but at least this is one place to look at. (I have no affiliation with them other than as long-time customer.)
I recently talked with the COO of a mid-size software company who was looking into HSAs and their payroll/insurance provider was pushing combined plans that included the medical and HSA into one managed plan. When I recommended he look into these self-managed HSAs and described them to him, he asked, "Is that legal?" I assured them that it is and that I've had one for many years. :-)
It's essentially a Roth IRA; it actually makes sense, due to compounding, to pay cash for anything your insurance doesn't cover, and max out your HSA every year, keeping it in there, and reinvesting. Well, it makes sense if 1) you have enough income or assets to want to shift an extra $3k/yr into Roth IRA equivalent and 2) you don't fear the law will change before you retire or need lots of uninsured health care money.
- Emergency services - Prescription drugs - Mental and behavioral health, and substance abuse treatment - Preventive, wellness, and chronic disease management - Pediatric services - Maternity and newborn care
Excluding based on pre-existing conditions will also be illegal starting in 2014. Until then - California has a health plan for pre-existing conditions here: http://www.pcip.ca.gov/Home/default.aspx and you can find information for all state here: https://www.pcip.gov/
If you meet some other qualifications (in particular have had coverage for 18 months and have used up any COBRA options you have), you are entitled to a guaranteed issue plan in CA if you are declined for an underwritten plan:
(i'm curious because i have recently run into this. here in chile, private health insurance is unlikely to cover long term medication but, thankfully, there is a government scheme for many major illnesses. so, for example, a month's supply of interferon-beta is $250 instead of $2000.)
The costs we calculated are yearly estimates - assuming you stay with the same plan, and they don't/can't raise your rates or cancel your plan - this estimate should hold for chronic illness.
We can estimate costs for specific chronic illnesses - click the "Personalize" button on the left side of the result page. You can select the specific chronic condition you're worried about, and it will provide a customized estimate.
My contact info is my profile - feel free to call/email if you have further questions.
thanks for the reply - i was just curious from a "foreign spectator" viewpoint.
i was going to ask what protection there was against cancelling plans, but a little googling seems to show that was made illegal as part of obamacare!
If you send me your email (mine is in my profile), I'd be happy to notify you when it launches.