Self-employment also means handling your own health care.
Workers leaving their 9-to-5 jobs to set up shop for themselves often look
forward to the freedom of being their own bosses, setting their own hours, and
charting their own courses.
Then sometime between the office goodbye party and the final paycheck,
reality hits. Self-employed workers are also their own benefits managers,
responsible for finding and paying for their own health insurance and any other
benefits they may need. Where to start?
Recommended Related to Health Insurance & Medicare
Medicare offers insurance coverage for prescription drugs for all people with Medicare. You may sometimes hear this coverage referred to as "Part D." This coverage is designed to help you save money on your prescription costs. It will pay for some, but not all, of your prescription drugs.
In its 1998 survey, the U.S. Department of Labor's Bureau of Labor
Statistics found that more than 10 million people are self-employed, either
full-time or part-time.
The soon-to-be self-employed who are leaving a job with health care benefits
may be covered under a federal law commonly called COBRA (the Consolidated
Omnibus Budget Reconcilation Act of 1985). Under this act, group health plans
sponsored by employers with 20 or more workers must let ex-employees continue
their coverage for up to 18 months, although the worker pays the entire premium
and it can be pricey.
Another option is to investigate whether you can be added to your spouse's
Striking Out on Your Own
If neither of these applies to you, begin your research by examining your
health insurance needs, advises Gene Fairbrother, a spokesman for the National
Association for the Self-Employed. Look at what health care services you've
used in the past, and figure out what you may need in the future. "When it
comes to health insurance you can't just plan for today," he says.
It's also a good idea to research the market in your state, and find out
what your state law requires of insurance carriers, says Madelyn Flannagan,
spokeswoman for the Independent Insurance Agents of America, Inc., a national
trade group in Alexandria, VA. Trends, rates, and options vary greatly from
state to state, Flannagan says. Consider a call to your state department of
insurance, or check out its Web site.
An Array of Options
As your own boss, you're not limited by what any one company offers in the
way of health plans. You can choose whatever plan works best for you:
traditional fee-for-service or a managed care plan. Another potential option is
a medical savings account, says Flannagan, but this route isn't chosen often by
newly self-employed workers because of the relatively high cost.
Web sites -- such as www.quotesmith.com, among others -- can yield instant
quotes and give you an idea of rates based on your location, age, and other
factors. Your state department of insurance may be able to provide you with
names of companies that sell individual policies.
"Talk to friends and business associates who are also self
employed," Fairbrother suggests. Ask them what works and what doesn't.
"Look also at organizations you may belong to," Flannagan says.
These might offer group plans, which are generally less expensive than
individual ones. One often-overlooked source of insurance is your college
alumni organization. Call your school, or the Alumni Insurance Agency and
Administrators at 800-726-2422.