If your employer offers you a health insurance plan, you may not realize the entire amount of premiums that are contributed per monthuntil you decide to quit your job to be self-employed. My husband received a nice benefit package from his previous employer (an institution of higher learning) and when we decided to start our own business after our first child was born, one of the major financial dilemmas we had to face was what to do about health insurance.
After discussing our options with my doctor, she encouraged us to participate in the COBRA plan offered by the University at least until our daughter was three months old. At that time, we had to pay $564 per month to remain active with our health insurance company. Now, I don't know how your monthly expenses add up but we could eat, have air conditioning or heat, cable television and water for that amount per month!
During that three months, we had every insurance representative we could find give us their sales pitch. Knowing that we had to cut back on expenses to make our home-based business a success, we realized that health insurance was unaffordable for the average person starting out on their own. Every insurance plan presented to us wanted at least $300 per month in premiumsand most of the plans would not cover our pre-existing conditions for one year. In effect, we would be paying over $3,600 in premiums alone (not counting the co-payments for doctor visits and prescriptions) before the insurance would pick up the tab on my husband's sinus allergies or my dermatological allergies.
After some serious number-crunching, we realized that over the course of a year we paid nearly $7,000 in insurance premiums! Then, we added up the medical expenses paid by us and by the insurance company (even the delivery and birth of the baby) and it came to less than $5,000. The reason for this is that as insured on a group health plan, the risks are spread out amongst all of the plan participantssome of who are using more health insurance and some who use less.
We then began to look at our out-of-pocket expenses for doctor visits. Our baby would need well-baby checkups every few months and I would need my annual exam and my husband would need his yearly physical. All of those expenses added up to less than $500 per year.
We could well afford to pay the doctors directly for our care compared to paying an insurance company "in case" we needed care.
With that decision made, we moved on to major medical insurance. This insurance usually has a higher deductible than health insurance in exchange for lower premiums. We found a well-known, reputable company that offered us a major-medical insurance policy for less than $110 per month with a $2,500 deductible. The only catch was that the major medical would not cover pregnancybut, we could live with that while we raised our first child and our first home-based business.
Over the course of that first year, we created our own medical savings account and set aside $190 per month. We were also able to take some tax advantages by purchasing the insurance through our company. At the end of that year, we had nearly enough saved for an emergency deductible in case of hospitalization.
But, despite the shock of health insurance premiums making us sick the inevitable happened. No, not an emergency appendectomy. I became pregnant with child #2 and we made the decision for my husband to return to full-time employment. The University he works for now picks up the entire cost of premiums but we still have our medical savings account that we started nearly five years ago just in case the high cost of health insurance makes us sick again!
©2000 Tammy Harrison. Tammy Harrison is a wife and mother of three children ages four and under. She has a degree from Mizzou in Human Environmental Sciences, Consumer Economics and Management, Personal Financial Management. She is the Independent Creative Representative for Home-Based Working Moms (http://www.hbwm.com)
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