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Budget Rates Life Insurance

Health Insurance
by Terence M. Burt


If you are self-employed, or otherwise in need of individual health insurance coverage, there are some basics of which you should be aware.

Cost Factors

First of all, the single biggest factor in the cost of your insurance policy is your state of residence. This is because each state has its own set of special conditions for which it mandates coverage. Each mandate imposed by the state increases the policy cost and/or reduces the number of companies that decide to offer coverage in that state. For example, the state of Massachusetts requires that all companies offer coverage for pre-existing conditions. While this seems like a good thing, the fact is that all policyholders end up paying for the extra cost to insure the most unhealthy policyholders.

To illustrate this, consider that in 2006 the average monthly cost of a typical individual health insurance policy in Massachusetts was $503. In the state of Illinois, the typical policy cost $98 per month. The national average was $173 per month, and the average annual deductible was $1,000. Rather than have this extra cost paid only by policyholders, another way to accomplish the same goal would be to have it covered by all taxpayers.

Health Savings Accounts

Of major importance are those policies that can be combined with a Health Savings Account (HSA) to achieve significant savings. An HSA is a tax sheltered account that you can use to pay for your medical expenses. You may contribute any amount to your HSA up to a predetermined limit. In.... that limit was ..... Funds which you don't use for medical expenses can be left in the account indefinitely.

Your HSA funds will continue to grow tax-free until you decide to use them. The funds can be used at any time for medical expenses, and FOR ANY REASON once you reach age 65. Congress intended these HSAs to provide the same tax benefit for individuals paying for their own health insurance as are provided to companies funding group health insurance plans.

If You Lose Your Job

What if you have been covered by an empoyer-funded plan and you lose your job? You will need to pay careful attention to your rights and the time-frames for exercising these rights. The COBRA Act of 1985 requires an employer-funded plan to offer continuation of coverage for 18 to 36 months. You may not want to continue this coverage because group health insurance is much more expensive than individual health insurance (because of the requirements to cover pre-existing conditions). Nevertheless, you may need COBRA coverage for a time period, until you can get your own individual coverage in place.

If you lose your job, you have up to 60 days to apply for COBRA coverage. You then have up to 45 days to pay your first premium. Meanwhile, you are covered during this 105 day period. If you suffer a major health crisis during this period, and before you have obtained new coverage, all you have to do is pay your COBRA premium to access your coverage. This means that actually have coverage during this 105 day period, even though you have not paid a cent. By the time the 105 days have passed, you may have already made alternative arrangements. So, by all means, make sure to apply for COBRA coverage before your initial 60 days have passed.

How To Obtain Coverage

If you know a health insurance agent, or if you are referred to one, take advantage of his or her expertise to get all of your questions answered. Only when you are comfortable should you take the plunge and purchase coverage. If you don't have access to a personal health insurance agent, there are resources on the Internet that can help. One popular destination is eHealthInsurance.com. This site provides coverage in every state and usually can provide you with several options based on your requirements.

Terence M. Burt is an independent health and life insurance agent representing many companies. You may contact Terence at terry@interlinx.com


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