Anyone considering leaving an established corporate job and starting a family business quickly encounters the daunting issue of health insurance costs. Replacing the full coverage typically offered to employees of large corporations can easily cost over $1200 every month! Obviously such high costs deter many potential entrepreneurs from even considering leaving their job and its fringe benefits.
If your family is currently healthy, going without insurance is an option. However, starting a business is risky and stressful enough without the added worry of how you might pay for a major medical expense due to an automobile accident or devastating disease. As Christians, we certainly must ultimately trust God for our health and for income to meet all expenses. But God also charges us to be prudent and not naively charge into a new venture without counting the cost or considering the potential setbacks we may experience (Luke 14:28, Proverbs 13:16, 19:2, 20:18, 21:20, 22:3, 27:12). In light of today's medical costs and the fact that treatment for a single serious illness or automobile accident can wipe out a family's entire savings and leave them with hundreds of thousands of dollars of debt, it seems prudent to have some sort of health insurance.
If you are seriously considering starting a business and are heeding the biblical warnings about debt, you should have a saved enough money to handle routine medical and dental expenses. These are funds you hope to use for your business, but could be used for healthcare without requiring your family to borrow money. If full coverage costs $1200/month, then as long as your routine medical expenses are less than $14,000 a year, paying these costs yourself is less expensive.
However, what if you have a serious health issue that will cost well beyond $14,000 a year? Then full coverage would seem cost effective. However, the better idea is to have insurance that will cover costs above the typical amounts yet have an annual cost well below $14,000 a year. These are known as Catastrophic health plans or high-deductible health insurance.
With high-deductible health insurance plans, your premium is usually about 1/3 to 1/4 the cost of full coverage plans with annual deductibles ranging from $2,500 to $10,000. The plans do not pay anything until your expenses exceed the deductible, then they pay from 70% to 100% of the costs, again depending on the plan.
For example, a family of 6 pays a monthly premium of about $300 for a plan deductible of $5000-$10,000. The same family pays $1100-1200 monthly for a $500 deductible. The insurance cost is $11,000 less, leaving that money available to cover out-of-pocket expenses. Unless your family is really sick every year, you will save a lot of money with the high-deductible insurance. And you have coverage for very expensive, unusual expenses due to serious disease or accident. There are several websites that compare health insurance plans for different premiums, deductibles, and needs. These estimates are from eHealthInsurance.com. They compare dozens of plans from many different insurance companies. It's free to use to estimate costs for your family.
As long as you have saved enough money to cover the out-of-pocket expenses, you are wise to get the lower cost insurance. Note that with the full coverage, you still need substantial savings to cover the $1200/month premiums. This puts substantial pressure on your business to be profitable immediately, which is unlikely. The result is many entrepreneurs going into debt immediately which puts them into bondage to a bank. Escape from the bondage of a daily corporate job is replaced by bondage to a lender.
High-deductible insurance should be purchased from a reputable company with a national presence. eHealthInsurance.com publishes the AM Best Rating for each company. Also, most companies will waive any waiting period if you've had continual coverage for 2 years prior to obtaining the new personal coverage. So be sure to have your new insurance in place before ending your current coverage.
Another option many Christians have considered are cost-sharing plans such as Medi-Share or Samaritan. These usually have monthly costs around $300. However, they do not cover auto accident or multi-hundred-thousand-dollar expenses from cancer or other serious disease. So you are still vulnerable to being wiped out financially due to a serious condition. For this reason, we prefer the high-deductible plans over the cost-sharing plans. We look forward to the day when cost-sharing plans can cover catastrophic situations.
If you have questions or have experience with personal insurance plans or cost-sharing or other ideas on how families can work together on healthcare costs, please add your comments.
health insurance: what if...
...you're diagnosed with a new serious medical condition. At that point, you can only stay with your current insurance; otherwise, your medical condition is "preexisting" and not covered with a new insurance company. If you stick with your old insurance company, your premiums will get higher and higher as healthy people drop out of that plan (why would the healthy people keep paying high premiums to support the sick people in the plan). I guess, at that point, I'd better have enough money to just "pay" for medical treatment, because the premiums will be about as high (and possibly higher) as just paying for treatment without insurance. One possibility is to go back to work (if medical condition allows it), to get cheap insurance again. Any ideas on avoiding the need to self insure or go back to work ?
Texas law prohibits this
I checked my policy and confirmed it on the State of Texas website. Basically, the insurer cannot selectively drop anyone unless it drops everyone on that plan. It must then offer all those dropped the right to any other plan they offer in the state. The insurer can arbitrarily drop an individual, but it must drop everyone in the entire state, and cannot do business in the state for 5 years.
"A carrier may discontinue a particular plan as long as it drops the plan for all policyholders. However, in this case the carrier must offer the policyholders who lose coverage the right to purchase any other plan the carrier offers. If a carrier withdraws from the Texas market entirely, it may not re-enter the market for five years."
Rates cannot arbitrarily be raised for an individual without raising them for everyone on that plan. If you go with a large company, there should be thousands in your particular plan, thereby making the probability of raising rates due to your specific illness very remote. A newer or less-known company would be a risk. If there were only 20 people on your plan, the company may possibly cancel that plan - but in Texas they would have to offer you any other plan they had, presumably without huge premiums. eHealthInsurance offers only plans that are licensed for the state specified.
More info here:
http://www.tdi.state.tx.us/pubs/consumer/cb005.html
insurance
A HSA (health savings account) is a good middle ground if your family is healthy. By the way have you checked out Dave Ramsey. Alot of your stuff sounds like things he teaches.
Dave Ramsey
I've heard Dave on the radio a few times but haven't read any of his books. I've read much from Larry Burkett, Ron Blue, and Austin Pryor - the "ancestors" of Dave Ramsey. Burkett's book The Coming Economic Earthquake in the early 90's motivated us to accelerate pay off of our first home. What a great decision that was - there is nothing like having 0 debt. I still remember the day I dropped the final payment into the mailbox at the post office, one of those few powerful moments in a man's life, like college graduation or having the first child.