By Steve Anderson
The vast majority of U.S. citizens who have health coverage – about 57 percent – get coverage through an employer-sponsored plan. Another 29 percent get coverage through a government plan – Medicaid, Medicare or the military. If you are self-employed, or if your employer does not offer health insurance, you’ll likely turn to the private market to purchase an individual health insurance plan.
Getting individual coverage is typically more difficult than qualifying for than a group plan offered by an employer; policies are individually underwritten, which means that the insurance company will closely scrutinize your complete medical history.
Health insurance companies are for-profit entities. When they agree to insure you, they are betting that you will pay more into the company in the form of premiums than they will pay out for your medical claims. Therefore, if you already have a medical condition, they may refuse to insure you – or they may put a rider on your policy that will not pay for that pre-existing condition. That’s why the best time to apply for insurance is before you have medical problems.
Group plans are often written so that you can still qualify even if you have a pre-existing condition – that’s because the risk is spread across all the paying members of your group. In very small groups, a serious illness can cause the insurance company to dramatically raise premiums for all the members of that group.
When you apply for coverage, be sure to disclose any medical problems you’ve had, no matter how insignificant you perceive the problems to be. If you don’t, you may fall victim to a controversial insurance industry practice called rescission. If you’ve been a victim of rescission, your insurance company has received a claim from you, and then – after reviewing your application and medical history for undisclosed conditions or inconsistencies – has cancelled your policy at a point when you needed it most.
So if an agent tries to “help” you by omitting any of your health history, they aren’t really helping you. They are just trying to close the sale. Buyer beware.
It sounds dire, but it’s essential that you have health insurance for you and your family. More than 60 percent of bankruptcies in the United States are the result of medical bills. Sadly, if you’re self-employed, you could be one major illness away from bankruptcy or losing your business.
In addition, over a recent six-year period, an estimated 137,000 Americans died due to a lack of health insurance. They either received too little care or received that care too late.
Because of profit-driven practices such as denial based on pre-existing conditions and rescission, options available to the self-employed and others without employer-based insurance are slim. But there are still options.
First, learn how to manage your risk. Decide how much debt you can manage should a serious illness occur, and consider opting for a high-deductible policy. You’ll pay for all your normal medical bills out of pocket and rely on your insurance only in the event of a catastrophic illness.
If you’re between jobs, be sure to consider coverage, even if you know you’ll be hired at a company with employer-sponsored coverage in the coming weeks or months. Private ensures created short-term health insurance for just this situation.
Another strategy is for the spouse of a self-employed person to take a job at a company that provides medical insurance. Often that job may do no more than pay for the employee’s share of the insurance and childcare, but at least you are protected from a catastrophic illness.
About 35 states offer health insurance high risk pools for people who have been denied coverage by private insurance companies. In a few places, like Minnesota, these plans are robust and offer an affordable – albeit higher-than-average-price – alternative. But risk pool plans vary widely from state to state. Check our guide for your state to see if this option is available to you.
Editor's Note: Opinions expressed on these pages are those of the individual author(s) and do not necessarily reflect the views of the management or ownership of healthinsurance.org.
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