Health Care & Entrepreneurs
A recent study found that among businesses that are well versed in the new federal health care law, more than half are planning to drop health care insurance for their employees. But to help inform entrepreneurs who plan to provide coverage for themselves or future employees, IB contacted two local insurance experts to explain the options in detail, assuming the law survives a series of legal and legislative challenges.
Barbara Schlaefer, owner-president, JC Rose Associates, has reassuring advice for sole proprietors. If you can tap into your spouse's insurance, that's one option to consider, but another route open to sole proprietors, particularly those who have left a company with group coverage, is to stay on COBRA (or Wisconsin continuation) for awhile. "Sometimes that works out well because if they have a (pre-existing) health condition, that guarantees them coverage for at least 18 months," she stated. "It gives them an opportunity to get their business up and running."
If you were to go out to the market and buy your own insurance, you must qualify health-wise; if you have a pre-existing health condition, it might prove difficult to obtain insurance. Under the new health care law, the only people with pre-existing conditions who are protected until 2014 are children. For adults, there are no "guaranteed-issue" plans on the individual market until 2014.
Different insurance companies view insurability differently, according to Tim Schiefelbein, a registered representative with Baer Insurance. "Insurability is probably the most important question because if they are not insurable, by an insurance company's standards and guidelines, they are not going to get the plan anyway," he said.
If you have a pre-existing condition when that 18-month continuation period ends, there would be advantages to having an employee. "If you've got an employee, you could go into the group market because the group market is guaranteed issue," Schlaefer noted. "Regardless of your health condition, they have to offer you something."
If after 18 months, you don't have an employee but you do have a pre-existing health condition that is uninsurable in the individual market, you would have to enter the state high-risk pool (hirsp.org). High-risk does not necessarily mean high expense because there is a sliding scale based on income where you can qualify for discounts.
If you need to purchase an individual policy, Schlaefer said the best place to shop is locally because you're going to get better pricing in a managed care plan.
"If you are applying for a group plan, the state of Wisconsin has a uniform application (at oci.wi.gov)," she added. "If you just fill out one application, you can apply to more than one insurance company at the same time, which is really a smart idea because insurance companies look at risk differently."
Schiefelbein said most entrepreneurs want to keep their own doctors, but they should entertain options. "Be open to different networks because this plan might not have your doctor, but it's got good benefits for you," he counseled.
Many local chambers of commerce offer insurance plans through local insurers, and they provide a discount for members.
The new health care law establishes tax credits to help businesses with under 25 employees and average annual wages of less than $40,000 afford insurance for their employees if the company pays at least 50% of the premium cost. CPAs have told Schlaefer that few small businesses have taken advantage of the tax credits due to limiting parameters and cumbersome forms.
Our experts don't view Health Savings Accounts, which can now be contributed to tax-free in Wisconsin, as a viable option. "In this market, we're not seeing a lot of people use HSAs," Schlaefer said. "The difference isn't great enough between a high-deductible health plan and your average co-pay plan with an in-hospital deductible. In order to really tap into the HSA savings, you really need quite a bit of difference in the premium to make it worth it, and we're just not seeing that in this marketplace."
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