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Self Employed Health Insurance

Posted on Wednesday, February 4th, 2004 by

Health Insurance industry gouges self-employed

In the State of the Union address, President Bush proposed health savings accounts, tax credits and allowing small businesses to jointly purchase Health Insurance plans as partial solutions to the rising cost of health care.

In the State of the Union address, President Bush proposed health savings accounts, tax credits and allowing small businesses to jointly purchase Health Insurance plans as partial solutions to the rising cost of health care.

As a self-employed small-businessowner, I can testify from experience that these ideas amount to the equivalent of treating a cancer patient with an aspirin, a Band-Aid and a face-lift.

Small businesses could save 10 to 15 percent by jointly purchasing health care policies, said Melody Harrison, Georgia director of the National Federation of Independent Businesses. But a typical family Health Insurance policy is $750-$1,000 per month. Even saving 20 percent will not make Health Insurance affordable.

Since 1990, I have purchased Health Insurance from four different companies. One of the policies was obtained through the National Association for the Self Employed. For a small monthly membership fee, I purchased an affordable ($234 per month), high-deductible ($2,000) policy from a nationally known insurance company.

After we had survived the 12-month window during which the insurance company could refuse to pay for any treatment by asserting the condition was pre-existing, I was confident I had taken prudent steps to ensure the financial and medical health of my family.

Then we received the premium notice for year two. “Due to the rising cost of health care, etc.,” we were informed that our premium was going up by approximately $90 a month, or I could choose to raise the deductible by $1,000 and enjoy only a $40 premium increase.

Because it’s always cheaper to raise the deductible by $1,000, and my wife and I were in excellent health, that’s what we did.

Everything was fine until I received the premium notice for the third year, the same exact form letter. The premium was $478 with a deductible of $4,000. Though we had never filed a claim, we were rapidly being priced into a high-premium, high-deductible insurance policy.

I was relieved considerably when an independent insurance agent suggested I try a different Health Insurance company with an affordable, high-deductible ($2,000) policy. (In most of these policies, the deductible is per person, not per family.

Again, we held our breath waiting to get through the 12-month pre-existing condition window. And yet again, the form-letter premium notices started to appear. For the first or second year the premium increase is modest, but by the third or fourth year, the policy is unaffordable.

Our insurance agent confirmed that the businessmodel of these insurance companies was to collect three to four years of premiums, then chase the policyholder away with large premium and deductible increases. By doing so, they practically eliminate the possibility of ever paying a claim. Their businessmodel can be summed up in the slogan, “Gone in 60 Months.”

If small businesses create so-called Association Health Plans, it is likely they will still be purchasing insurance from these predatory companies with their low introductory rates. The only result will be insurance companies will collect even larger amounts of money more efficiently than ever.

Even with a legitimate insurance company, I predict the premiums will be intolerable after only a few years, just as they are at large companies such as Kroger, Ford and General Motors.

Allow me to suggest two proposals that would help solve the problem of predatory insurance companies.

•When a person has been with a company for at least three years and changes health insurance providers, require the previous insurance company to cover that person or family for the duration of the pre-existing condition period of the new policy.

This would reduce the incentive of insurance companies to get rid of pesky policyholders, and give companies an incentive to reduce the pre-existing period to a more reasonable six months.

•Second, require health insurance companies to reveal to prospective customers their rate histories — starting with the introductory rate — for the previous five years for policyholders with a similar profile.

No one would sign up for a policy if they knew their monthly premium would jump in five years from $250 to $600 and the deductible from $2,000 to $5,000 or higher, even when no claims have been filed.

But the larger problem remains that the average American cannot afford hospital care and the average American cannot afford quality health insurance. To solve the health care crisis, a solution must be found that guarantees affordable, quality health care to every American.

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