Insurance is Evil. And necessary.

I have received a couple of queries about insurance and being a solo practitioner, so I thought I’d spill.

I want to preface my answer with a couple of gratuitous comments about the horror that is the insurance field. Insurance companies are, in my opinion, the devil. They are worse than credit card companies – and that’s saying a lot. They base their whole existence on the notion that you will pay in more than they will pay out. This is accomplished by capricious rules and exhausting hoops that you, the person who is paying them, have to do in order to possibly get benefits that ostensibly you’re paying for in the first place (which will inevitably be denied by some idiot clerk staring at a computer screen). It is a vile, noxious scheme which has dramatically escalated the cost of health care while forcing parents and physicians to make choices based on economics and not sound medical or practical advice.

So there. That’s my commentary on why health insurance companies suck. And let’s not forget that they suck at our expense: not only are we paying them, they get a nice ol’ subsidy from taxpayers in the form of a tax exemption.

But I also know that without health insurance, it’s almost impossible to get care. I found this out firsthand while in between jobs. Chris and I were not married and he was working; we were living together (it’s okay, my mom knows). We had income but no insurance. I was walking Lyle. Lyle saw a cat. Lyle didn’t stop to think what would happen if he took off after said cat while my hand was still on his leash. The answer: spiral fracture. I went to the ER for treatment. I clearly needed an X-ray. I had to standby while Radiology did a credit check (!) before giving me an X-ray. Puzzled, I said that I thought they had to give me care irrespective of my insurance/financial situation. Only life-threatening health situations, they answered. A bone break is not a matter of life and death and thus if my credit wasn’t good, they didn’t have to treat me. Nice, huh? Fortunately, I “qualified” for the X-ray and all was taken care of. The lesson that I learned that day? Our health care system stinks.

I also learned that insurance was extremely important but not because of the cost factor. I was actually “ahead” in that X-ray scenario. My insurance costs were almost $350/month. I did not have insurance for a year – total I initially saved by not paying out of pocket: $4200. The cost of the X-ray plus ER visit: about $1500 (it was “cheaper” because the cost to a private pay patient is not as much as the hospital bills the insurance company – since insurance companies deny and negotiate everything, hospitals are forced to “bill high” to recoup anything). I was still ahead by about $2700. The problem was that most doctor’s offices (including my follow-up with the orthopedic surgeon) didn’t want to see me as a private pay patient. They like the security of insured patients. And so, I had to get insurance.

And here’s the bit about being on your own that you have to understand, whether as a solo practitioner, a freelance writer or an entrepreneur: don’t go solo. The insurance company will crush you to pieces. And here’s what I mean. When Chris and I first applied for individual health insurance, we were horrified by the screening process. There were questionnaires, health screenings (a nurse at the house), forms out of the wazoo… and oh yeah, a premium as high as the sky. That’s because we had no power. We were the little guy. We had no leverage. And the insurance company could make it as difficult for us to get coverage and as expensive to buy coverage as they wanted.

Then we got smart. A friend suggested that we form a group. Bingo! A group policy is the key. Group policies are cheaper per person. They do not require physicals. Coverage cannot be denied for pre-existing conditions.

You’re thinking, group? But there are only two of you… and you’re married? Behold the beauty of the group plan: a group means two. Chris and I registered as two single married persons (!). It’s allowable and meant that we had a group.

My insurance was, believe it or not, more expensive than Chris’ based on a demographic study – even though he was older than me. Be prepared for this. Women are always more expensive than men because of the “potential” for child-bearing. This is another reason to consider a group. Because of the cost differential, after I had my children, I remained separate on the insurance and Chris added all of the children to his plan. If we had consolidated as two parents + family (which we could do and keep our group since we had added other employees), the cost was considerably more expensive. It’s a pain in the ass, but run the configurations before making a decision – the costs are usually more expensive for what feels like the easiest options. My cynical take on it is that it’s purposeful. Just be educated.

If you’re looking for ways to grow a group, you can even add part-timers to a group plan. If, say, your aunt does your bookkeeping, you can add her to your group.

If you don’t wish to add part-timers to the plan, you can consider other group options. Some bar associations have group plans that you can sign onto – and other career organizations have similar plans. And if all else fails, check with your local chamber of commerce – ours in Philly offers a group plan through the Chamber.

One final note: often, you’ll have to be a bona fide company in order to get group benefits either through your own group plan or through the Chamber. This means you’ll need to consider incorporating or forming a partnership (which is usually a good idea anyway). We incorporated before we opened our doors. It did a lot of things for us – protected our personal assets from liability, gave us immediate credibility and let us apply for benefits like health insurance and life insurance with fewer hoops.

The average cost (according to the Philadelphia Inquirer) for a family to have health insurance is more than $12,000 per year. Our costs are less than that for fairly decent insurance coverage.

My disclaimer in all of this is that this is based on my own experiences (and those of my clients) in Pennsylvania. I am not sure how other states (other than NJ, which is largely the same as PA) regulate the health insurance industry but if I had to guess, I’d say it’s pretty similar in most states. The insurance lobby is huge and a lack of meaningful restrictions is probably across the board. If you’re not sure, check with your local organizations – again, the Bar tends to be really helpful. I’ll also put in a plug for joining the Small Firms and Solo Section of the Bar. In PA, it only costs something like $25 extra per year and you get lots of valuable perks and advice. You can check the PA web site here.