Health Care: How Reform Affects the Self-Employed

I enjoyed your article on health-care reform for small business owners.I'm coming out of unemployment into full-fledged self-employment. There are two of us in the company, which is a hosting service for foreign students. Where do I turn to get health insurance through my own company? —E.Q., Bronx, N.Y.

Congratulations on starting your business. Since you have two people on the payroll, your company qualifies for small-group health insurance coverage. (Partners and employees working at least 30 hours per week count in that calculation, but independent contractors do not.) If the annual pay for you and your partner doesn't exceed $50,000 apiece for the next few years, you'll also likely qualify for the 35% tax credit for small business owners that provide medical benefits under the new health-care reform law.

Your first step is to find a reputable insurance broker. You can search the database of the National Association of Health Underwriters or better yet, ask other business owners you know for referrals.

A good independent broker will meet with you, go over your needs and options, and present you with quotes from several insurance providers. He or she will also help you get signed up for the coverage you choose and will remain a resource for you as long as you keep that coverage.

Ask any broker you meet with how their compensation will impact your cost, says Chad Charton, a vice-president at FMS Financial Partners, an employee-benefits firm based in Encino, Calif. Independent brokers are typically paid by insurance companies, so there should be no cost to you. "In the small-group marketplace, most brokers receive a fixed percentage based on the premium-per-month" they sell, Charton says. That means that the higher the premiums for coverage you buy, the better commission your broker will get.

Cost will vary widely, based on the going rates in your region, how healthy you and your partner are, what kind of benefits you need, whether you want insurance just for yourselves or if you also want to cover spouses and children, and what kind of deductibles and co-payments you are willing to accept, says Michael Silverman, an insurance broker in New York and president of Gloron Agency. In New York State, your ages will not be a factor, he says, because single adults get the same rates for the same coverage under state law, no matter how old they are.

coming: a high-risk insurance pool

Stan Hodges, president of Hodges & Associates, an insurance agency based in Atlanta, says that ballpark figures for monthly coverage may range from $200 for a single adult to $1,500 and up for family coverage. "It's all based on what you can afford and how much you'll use your plan," he says. "Generally, it's a buyer's market because small business owners know what they can and can't afford."

If either you or your partner has a pre-existing medical condition that has barred you from getting coverage in the past, starting this summer a national high-risk pool is to be created to let you buy coverage at reduced rates until 2014. It will then become illegal for insurers to turn down customers because they have medical conditions.

"We suggest that clients contact their doctors and ask what health networks they participate in. That way, if the majority have doctors in one insurance network, that's the one we will go to first," Silverman says.

Another option you might explore is hiring a professional employer organization (PEO) that will handle not only your company's insurance coverage, but additional administrative tasks such as payroll and taxes. PEOs typically charge a per-head fee and they work with very small companies such as yours, says Burton M. Goldfield, president and CEO of TriNet, a PEO based in Northern California. "The upside is that the PEO will coordinate and extend benefits to employees and can pool their clients to negotiate with large insurance carriers to offer customized plans typically reserved for a larger company," Goldfield says. "Owners must weigh the cost savings of better rates plus time saved, vs. the costs of working with a vendor."

Before it's here, it's on the Bloomberg Terminal.