health insurance (long response) - Posted by Tony Colella
Posted by Tony Colella on July 11, 2007 at 05:49:49:
Great question Brenda and one that we talk about in our boot camp. I personally believe that the fear of not having health insurance is what limits many great minds (or becomes their excuse) from not forging out on their own to create a business or become self employed. I believe this not only limits the investor financially but I believe it is a huge limiting factor for our country.
For me I finally just reached a point where I gained a perspective with health insurance that seemed reasonable and affordable (sound like a Lonnie perspective?).
Steve mentions HSA accounts and although I did not pursue that approach, it sounds like one that needs consideration.
What I did was decide to view health insurance as a fact of life type expense. Just like any expense in life I needed to justify receiving the best money’s worth while finding a way to limit my costs to a reasonable amount.
I looked at my life and realized it was very, very rare that I ever went to a doctor or hospital but I also realized it could happen. I decided that for me (no dependants) all I needed was what I called a catastrophe type plan. If I was injured and needed some minor medical attention or fell sick with normal flu’s or the like, then I would set aside some cash to cover these moments if necessary (necessary meaning if insuring these smaller expenses cost more than the expenses themselves would).
For me I also decided that the true concern I was insuring against was large medical bills. I decided to set aside atleast a years worth of deductibles if not several years in a savings account of my own. This way I had ready cash to cover any expenses necessary before the insurance kicked in. Quite honestly, I probably could do the same with a credit card but one side benefit of this cash savings plan that helped me and my business was the banks would see that cash in the bank for several years and when I financed real estate deals, they often commented on the ready cash I had to help solve problems. It made good financial sense to me and to my lenders.
My first health insurance had a very high deductible (and I wanted higher) but very reasonable monthly payments and a high coverage. I had this plan for several years and never once used it so I cannot say how it would have worked from my experiences.
I later switched to Blue Cross/Blue shield and found a better plan for about the same amount. Please realize that health plans change in price and benefits by state from what I have seen.
This new plan I have had to use twice in the last couple of years, each time for very minor costs which I had thought I would pay for from the deductible. I was pleasantly surprised that this insurance also covered these costs and both times I paid a $15 co pay only.
From what I now understand the high deductible typically applies to things like MRI’s and other similar type expenses I would previously have labled as “catastrophe type expenses.” If I am hurt that bad then I will need to pay for the deductible. So be it. If I am hurt that bad, the cash is already set aside and the rents from my properties will continue to come in. I may have to hire help while I recover but money and credit is there for this type of emergency.
Keep in mind that these deductibles are a bit tricky from what little fine print I read. As I understand from my reading (please someone correct me if I am wrong), the deductibles are by calander year. If I get hurt in Dec 07 and go through my deductible, come Jan 08 I get to pay that deductible again even though it has only been a month. This is the reason to have more than one year’s deductible in savings. You also want cash for meds etc.
By setting aside cash I limited my need to insure small money and lowered my premiums. By setting aside cash I was able to better present myself to banks who were willing to lend me more money on real estate which makes me more money.
Health insurance needed (for me) to be viewed like a busines decision. Once I did that I was able to get the best product for me for my money.
Again, I only know a very little bit about insurance plans etc. and please do not take this as advice to follow without your own investigation. This is what worked for me and may not be what is right for you or anyone else.
I do however believe that anyone considering self employment who has a good, proven business they have tested already for themselves, can make health insurance affordable if they analyze it just like they do any business decision.
For the record, I did not go with the cheapest plan. I went with the one that gave me what I wanted for a good price. Some companies offered lower premiums but I always seemed to find a lower benefit hidden in the small print.
Take the time to do your health insurance “due diligence” and I suspect you can find an affordable and reasonable health insurance plan (and for much, much, much less than your cobra plan).
Tony