Updated on 5/26/14: As of January 1, 2014 most of the information in this post became outdated due to the start of the Affordable Care Act. Insurance companies can no longer deny me insurance because of my pre-existing conditions. They can not charge me more than a man of the same age because I’m a woman. (Yes, they used to do this.) When I applied for health insurance under this new act the application was only 4 pages long. When I’d applied before the act the application was 22 pages long. It was shocking how easy it had become now that they no longer could quiz me on all the medications I’d taken in the past 2 years or ask me if I currently had any chronic diseases.
I’m going to keep this post up as a reminder of how awful it was before the ACA. If anyone feels the need to complain about any imperfections in the ACA they can see how much worse it was for people like me before it.
When I started freelancing full-time in July 2009, the most challenging problem I faced wasn’t how to get clients, how to figure out taxes, or how to track my invoices. The most challenging problem was figuring out how to get health insurance for a chronically ill, self-employed person. I live in the US and at this time health insurance is typically employer based. You get a job and get to be part of that employer’s group plan. Outside of that, some people qualify for Medicare or Medicaid. I don’t know much about those programs other than I don’t qualify for them, but if you’re old or poor you might.
I faced more difficulty than normal getting health insurance because I have a chronic headache and I’m overweight according to the BMI charts. Typically, the more you need health insurance, the less likely you are to be approved for it. Health insurance companies aim to make a profit or at least break even, so they don’t like to acquire customers who will take more than they give. I thought I’d write about my experiences trying to get health insurance in the hopes that it will help any other sick or fat freelancers out there.
PLEASE NOTE: I do not work for an insurance company and I am not a medical professional. This information comes from my personal experiences with health insurance companies and medical professionals over approximately the past 10 years. It’s possible that some of this information could be incorrect or outdated. Please double-check everything with your own providers. This information is based on my experiences as a single female in her 20’s applying for plans without any dependents. Your options may differ depending on your circumstances.
First stop, COBRA (No, not the snake)
I worked full-time at a corporation before I left to freelance. Because of this I qualified for COBRA (Consolidated Omnibus Budget Reconciliation Act). COBRA gives you the right to stay on your employer’s health plan for 18 months after leaving their employment, but you have to pay the full price of the insurance. Typically when you’re employed by someone else they pay for part of the insurance and the other part is automatically deducted from your paycheck. When you go on COBRA the price you pay for insurance goes up to cover the part your employer was paying. In my case COBRA cost about $400 a month and included dental. This is kind of expensive, but it was still less than I would have spent on my medications and doctor appointments without the insurance, so I was happy to pay it and be covered.
This was great for 18 months, but then I faced another problem: What the hell would I do when COBRA expired?
Individual insurance plans (Flying solo)
Let’s start by clarifying the difference between individual plans and group plans. When you are part of a group, like all the people who work for a big corporation, that group is able to go to the insurance company and say, “Hey, we can bring you a lot of business, but you have to insure everyone in our company. You can’t pick and choose who to cover in the pool.” So, even though some of the people who work for the company are sick, a lot of them aren’t. Covering those sickos who take more than they give is worth it to get the business of everyone else who gives more than they take. The insurance company determines a rate based on their magic formula and everyone in the company gets insurance.
If you don’t work for a corporation or if the one you do work for doesn’t offer insurance, you can apply to a health insurance company for an individual plan. In this case you answer lots of questions about your medical history. They ask your weight, age and height. They ask what prescriptions you’ve taken in the past two years and what surgeries you’ve had. There is a long checklist asking if you’ve had any problems in certain areas, like heart health, liver disease, diabetes, etc. They make you confirm that you’re not pregnant and that you don’t have HIV. You give them permission to access your medical records. They make you disclose if you’ve recently been diagnosed with a disease. (They don’t want sick people applying for insurance right after they get sick. They’d lose money that way. In their defense, it is like applying for fire insurance when your house is on fire. If they let you do that, why would anyone pay for insurance until they were in trouble?)
Someone reviews your application and double-checks all your information, looking through your medical history and pharmacy records to be sure you’ve been honest. Sometimes they’ll call you or send a letter asking for more information about something. Then they decide whether you’re a small enough risk to insure. They look at their actuary tables and give you a rate determined by your age, gender and weight. If you’re fat you have to pay extra. If you’re way too fat, you’ll be denied. If you’re a woman in your 20’s, you’ll be paying about twice as much as a man in his 20’s. I believe this is because 1) Women are more likely to go to a doctor, whereas men try to tough it out and 2) You are a potential baby factory and your uterus could cost them thousands of dollars in pregnancy-related fees if you get knocked up. So, even if you’re not getting screwed, you’re getting screwed.
Because you are an individual, you do not have the negotiation power of a group. The health insurance company had to take all the sickos in the group plan if they wanted the business as a whole, but they have no incentive to insure a sicko when you are a lone sicko applying by yourself. So, if you have a chronic headache condition like me, you’re totally screwed. There’s no way they’ll insure you because you are a money pit. However, there is a nice ditch behind the hospital that you can go die in.
You can find and compare insurance plans in your state by visiting eHealthInsurance.com. It can be confusing figuring out what each plan covers, but most of the differences lie in the deductible, co-pays and out-of-pocket limits for the year. Oh, yeah, you’d better start learning all the technical health-insurance lingo because you’ll need to understand it.
Short-term insurance (A temporary stopgap)
Health insurance companies also offer something called a short-term plan which is different than an individual plan. A short-term plan runs for 6 months maximum, but you can request a term shorter than that if you like. Short-term plans are meant to cover someone when they experience a short lapse in insurance, like when they’re in between jobs. Because the term is so short, the risk that you’ll get sick in that time drops which makes you more appealing to the insurance company. They won’t be stuck paying for years of your prescriptions and doctor’s visits, so you’re more likely to qualify for a short-term plan, though you might still get denied. And even if you do get covered, you’ve only fixed the problem for six months. I never applied for short-term insurance when I was sick, so I don’t know how likely they are to deny sickos, but I’d guess the chances aren’t good.
Most insurance companies will let you apply for a second short-term plan of six months after your first plan. But after that you usually have to wait another year before you can apply with them again. You can play a game where you flip-flop between two insurance companies every year. I did this right after college when I worked at a small company without a group plan. I wouldn’t recommend it unless you have to do it. It’s mostly meant to protect you from a huge bill if something catastrophic happens, like a car accident.
The other point of most short term plans is to prevent you from having the dreaded pre-existing condition. If you’ve experienced a gap in coverage longer than three months (I think, though it might vary), any medical problem you were diagnosed with before that time becomes a pre-existing condition. And trust me, YOU DO NOT WANT A PRE-EXISTING CONDITION. Please note that pregnancy counts as a pre-existing condition, so you really want to be insured before you get pregnant.
If you do experience a lapse in coverage, your next insurance company either won’t cover anything related to that condition or will enforce a waiting period before they will. Usually that term is 12 months, which means you’ll be paying the full cost of those bills for a year. Also, you won’t be privy to the discounts the health insurance company has with providers.
Oh, yeah, did I mention that medical fees are cheaper when you have insurance? In the same way that a company seeking a group plan can bully an insurance company to give them a good rate and cover their sickos, an insurance company can bully doctors and hospitals to give them discounts because they provide them with lots of business. If a doctor or hospital isn’t covered by your health insurance plan, you’re a lot less likely to go there, so it’s important for them to keep the health insurance companies happy.
This means that when you have no insurance, or if you’re waiting for a pre-existing term limit to expire, you’ll be paying full price for all your bills. No discounts for you! If you’re savvy, you might be able to talk to the billing department beforehand, play your sad violin and finagle a discount out of them. The hospital prefers to get paid something instead of getting paid nothing if you declare bankruptcy. Medical bills are the number one reason people declare bankruptcy in America. Sometimes the hospital can write off costs you don’t pay as some sort of tax advantage which I don’t know much about, but a friend of mine who had cancer and no insurance was able to do this.
The problem with short-term plans is that if you develop a chronic condition that takes longer than six months to treat while you’re on one, it’ll be much harder to get another policy when yours expires.
Find another group plan (Share with someone else)
If you’ve been denied individual insurance and short-term insurance doesn’t sound like it’s for you, you can try finding a group plan not connected to your employer. Usually this means going on your spouse’s health plan. People who are at a disadvantage in this aspect are homosexual couples who live in states without gay marriage rights or who have plans that don’t support life partners. Also, single people. (Why did you bother working hard to start your own business when you could have been looking for a sugar daddy or sugar mommy to pay your medical bills?) If you’re under 26, you can get on one of your parents’ plans.
I am not married nor am I under 26, so the options I looked at included things like the Freelancer’s Union or the Author’s Guild. These are organizations that offer group plans…if you live in certain states. To qualify for the Freelancer’s Union group plan you must live in certain counties in New York state. For the Author’s Guild, you must live in certain New York counties too, but there are also Massachusetts plans. They offer plans in a few other states, but their site says they have become too expensive for most members. Let me emphasize, those are the states where you can get a group plan, not an individual plan. As I mentioned above, a group plan has more bargaining power because the healthy people in the plan balance out the sickos.
There are likely plans offered by other professional groups, so you can try searching for one in your chosen field. The web sites for these groups also usually include links for you to apply for insurance even if you live outside the area that qualifies for the group plan. However, applying that way is no different than applying for an individual plan. So, if you got denied for that kind of plan before, you’re probably going to get denied again if you apply through those links.
High-risk pools run by your state
If you’ve struck out with all of the above, you can look into options your state might offer. Many states operate high-risk insurance pools that are made of sickos like us who can’t get health insurance anywhere else. The qualifications for the plans vary from state to state. Typically they require that you not qualify for any other coverage, regardless of how expensive such coverage is. I had to wait for my COBRA term to expire before I qualified. I think some states require that you’ve been without insurance for several months before you qualify, which really sucks because of the pre-existing condition implications. You can find out more about the options in your state by using the finder at HealthCare.gov. Be sure to select that you are an “Individual with a Medical condition” to get info on high-risk pools.
I was fortunate that the state I live in, North Carolina, has a high-risk plan you can apply for after living there for a month. To qualify I had to have been denied for individual health insurance within the past 6 months. That meant I had to go through a farce of applying for coverage when I knew I’d be denied. Because of that, I decided to save time by only filling in enough information that I thought would surely get me denied, leaving out many of the dozens of meds I’d taken in the past two years because I didn’t want to spend all that time digging through my medical records. Big mistake. The insurance company checked my pharmacy records and made me reapply. It took at least an hour or two to fully fill out the application and then I spent another hour on the phone with a representative who wanted to go over all the medications I’d taken. All this just to get denied.
I qualified for the North Carolina Inclusive Health State Option and got to choose between several plans with different deductibles. The plan was pretty comparable to my COBRA plan, but it costs over $100 less. Be sure to triple-check the checklist if you apply for coverage like this. I thought I had sent all my paperwork, but I’d missed the fact that I needed to send in a Certificate of Credible Coverage, the lack of which temporarily instituted the 12-month hold on treatments related to my pre-existing condition, a chronic headache. The Certificate of Credible Coverage is a note from your old insurance company saying how long you’d been covered by them. In the case of my plan, North Carolina needed me to have been covered for at least 18 months to remove any pre-existing condition holds. What was funny was they had my proof of COBRA termination letter on file which clearly stated I’d been on it for 18 months. But, whatever. If any of this made sense I wouldn’t have to write this post.
It was not fun getting a letter from the mail-in pharmacy a week before my meds ran out saying they couldn’t fill the prescription, even though I’d sent it in a month beforehand to leave plenty of buffer time. I had to pay full price for my meds at a local pharmacy, which cost over $500. I quickly filed the Certificate of Credible coverage, and I was reimbursed three months after I sent in a claim, but the whole thing was a huge pain in the ass and almost a pain in my head if I hadn’t been able to get the meds. So, let this be a lesson to you. Triple-check the checklist! Call someone to be sure all your paperwork has been submitted!
Changes in 2014 (if you trust the government)
There are supposedly changes coming to the US health insurance system in 2014. Everyone should be able to buy health insurance under either state or federal plans, or they can just keep their employer’s insurance if they’re on that. I certainly hope all this comes to pass, but I’ll believe it when I see it. I wouldn’t be surprised if the whole thing gets delayed several years or they find some way to change the bill or totally nix it. The US was supposed to switch to the metric system back in the 90’s or 80’s, but that never happened.
Wow, you’re still reading this? You really must be sick
So, there you go! There is my summation of what I’ve learned about the health insurance system as it relates to sick, self-employed people. I hope it helps you out. If you don’t qualify for anything I mentioned, you might want to consider moving to a country that provides better coverage for its citizens. I know someone with a chronic condition that actually did this.
If anyone caught any factual errors in my post, let me know and I’ll make corrections. I think this topic is too complicated for one person to know everything. Feel free to add your own advice or experiences in the comments. You can ask questions too, but as I said I’m not an expert, so anything I say should be double-checked with a professional.
Good luck! You’re going to need it.