Six strategies in the search for affordable health insurance

by Tony Novak, MBA, MT, OnlineAdviser at Freedom Benefits, last updated on 11/21/2011

Self-employed individuals are struggling more than ever before to maintain affordable health insurance. National average price increases of 18% this year combined with a dwindling number of reputable insurance companies add to the challenge.

First, the bad news: Individuals with significant pre-existing medical conditions now find it impossible to find low cost health insurance. Coverage is available through higher cost plans specifically designated to handle the higher medical costs. Likewise, residents of California, New Jersey, New York, Massachusetts, Vermont, and Washington will find it impossible to find reasonable priced individual health insurance due to restrictions in state law. In all of these cases, the monthly cost of family health coverage can exceed the amount of the average mortgage payment.

In the other states, there are six strategies used by healthy self-employed people to cut health insurance costs:

1. Buy short-term coverage. A plan that is limited to 1 year is 25% less expensive than a renewable insurance, and a substantial portion of health insurance purchasers change plans voluntarily within a year anyway. Taking a plan with a duration of six months cuts the cost another 15% to 20%.

2. Shop online. Sites like FreedomBenefits.net make it easy to compare prices of various plans side-by-side. Many plans now allow for fast online enrollment.

3. Discount PPO plans are so inexpensive - some are even free - that it simply does not make sense to pay full cash price for out-of-pocket medical, dental or prescription costs that are not covered by insurance. Websites like Ehealthdiscountplan.com offer a 30-day money-back satisfaction guarantee.

4. Save on taxes. Health Savings Accounts and Healthcare Reimbursement Accounts can be combined with less expensive health insurance to save some money at tax filing time. These don' t cut health care costs; they just make more of the total health care expenses tax-deductible even if you do not itemize your tax deductions. HSA plans can be set up at no cost but many businesses do not qualify. HRAs are more liberal, but cost about $150 per year at Websites like FreedomBenefits.org.

5. Split family policies. When shopping for family coverage, shoppers often find that the best deal available to the husband is different from the best deal for the wife and even different from the best plan for the children. Families need to be “scrappy” in piecing together the combination of plans that results in the overall best value for the members collectively. Do not settle on a health plan just because one family member is not eligible. Mix and match for greater savings and coverage. Many families are best served with a combination of policies rather than a single health insurance policy.

6. Purchase limited coverage. Don't be afraid to purchase coverage that covers part but not all of your potential medical costs. The concept of "full coverage" is largely a marketing illusion since virtually all health insurance policies have gaps in coverage that cannot be reasonably controlled. See Core Health Insurance for details on the most popular mini-med plan at Freedom Benefits.

OnlineAdviser offers free independent help with individual coverage selection by telephone or email.

Tony Novak is a member of the Pennsylvania Institute of Certified Public Accountants, the New Jersey Society of Certified Public Accountants and an accredited member of the Better Business Bureau.

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