Of all the fringe benefits you’ll give up when you leave a job to start a business, company-sponsored health insurance may be the one you’ll remember with the most fondness. Even the high monthly premiums and hefty co-pays you may have gritted your teeth over will suddenly look like insurance nirvana when you’re confronted with the prospect of footing the entire insurance bill yourself.
“The corporate world really spoiled me,” says Sandy Dixon, 56, owner of Interior Arrangements Inc., an interior redesign and real estate staging company based in Evergreen, Colorado. “[When I started my business,] I was really surprised by the high cost of insurance and suddenly had a new appreciation for this corporate perk.”
In fact, entrepreneurs often find it a struggle to get health-care coverage at an acceptable rate. And forget about dental or vision insurance--those plans are often far too expensive for sole proprietors. Yet medical insurance is more a necessity than an extravagance. A long-term illness or surgical procedure can wipe out your savings, not to mention your business capital. You must make obtaining health insurance a priority, even if your startup dollars are limited or your monthly operating costs are high.
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The best value for your health-care dollar is usually a traditional major medical policy, which provides hospital and surgical coverage. However, medical checkups, ongoing care for conditions like diabetes or heart disease, care for other pre-existing conditions and prescriptions won’t be covered, meaning you’ll have out-of-pocket expenses every time you see a doctor. “I think twice about going to the doctor,” admits Dixon, who has this type of insurance. “I also have a very high deductible to keep my premium as low as possible.”
Of course, entrepreneurs can obtain a PPO, HMO, managed-care or short-term major medical plan. But many fledgling entrepreneurs eschew these plans because the premiums are simply too high.
Fortunately, there are ways to get the coverage you need at an affordable rate. First, take advantage of COBRA continuation health coverage after you leave your job. The rates are often lower than what you would find on your own. Once COBRA runs out, contact the membership office of any professional organization to which you belong—many offer insurance to their members at a discounted group rate. For instance, the Georgia Bankers Association offers its members a variety of medical plans, including traditional coverage, HMOs and early retiree plans. Also, investigate plans available through general business organizations such as the chamber of commerce or groups like the Michigan Business & Professional Association, which offers access to five Blue Cross Blue Shield plans. Finally, check into plans offered by organizations like AARP or organizations for the self-employed, which offer numerous insurance products to meet just about any need.
Another viable way to find more affordable insurance is by contacting an insurance broker, who represents numerous insurance products from many different companies. A broker compares policies and levels of coverage, so you’ll end up with a good insurance policy at an affordable rate.
No matter which type of insurance you choose, here’s some good news: Uncle Sam allows you to deduct 100 percent of the amount you pay for both medical and dental insurance if you report a net profit on Schedule C, C-EZ or F. Ultimately, that makes insurance affordable for virtually every entrepreneur, while buying you some peace of mind.
Eileen Figure Sandlin is an award-winning freelance writer and author who writes on business topics.