Comprehending the Struggles of High Health Insurance Costs for Self-Employed Individuals

As a self-employed person transitioning into retirement, I have gained a unique perspective on the health insurance landscape. Contrary to popular belief, the costs of health insurance can actually be lower for a self-employed individual compared to others. However, this varies significantly depending on income and other factors.

Health Insurance Dynamics and Self-Employed Individuals

Traditional employer-based health insurance systems operate on a group model where premiums are shared among a larger number of enrollees. The risk of adverse selection and high costs is mitigated because employers enroll employees en masse, and selection biases are less likely to occur.

For self-employed individuals, the insurance landscape is considerably different. There is no pre-existing group of employees to draw from, leading to a higher risk of adverse selection. Adverse selection occurs when individuals with higher risks (i.e., pre-existing conditions or anticipated illnesses) are disproportionately likely to enroll in a plan, driving up premiums for everyone, including the self-employed.

The Role of The Affordable Care Act (ACA)

The ACA addressed the issue of adverse selection by mandating that everyone must buy health insurance, which theoretically spread the risk evenly across the population. However, this provision was later repealed, leading to a new problem. The ACA also prohibited insurance companies from denying coverage based on pre-existing conditions, which meant that individuals could wait until they were sick before purchasing insurance. This created a scenario where premiums skyrocketed, not only for self-employed individuals but also for employed individuals and small businesses.

Impact and Solutions

Healthcare is a basic necessity, but our current system remains imperfect. The costs of healthcare and health insurance can be overwhelming, especially for self-employed individuals who rely solely on their income for coverage. High blood pressure, diabetes, and coronary disease are common issues in the self-employed demographic, contributing to the high costs of healthcare. Several factors exacerbate these issues:

Red Meat Consumption: High intake of red meat is linked to a variety of health problems, including heart disease. Smoking: Smoking significantly increases the risk of coronary events and chronic conditions. Alcohol Consumption: Excessive alcohol consumption can lead to liver disease, hypertension, and heart problems. Lack of Exercise: Sedentary lifestyles contribute to obesity, heart disease, and other chronic conditions. Stress: Chronic stress can lead to a host of health issues, including heart disease and hypertension.

These factors, along with the high costs associated with medical emergencies and procedures, make it difficult for self-employed individuals to manage their finances. Coronary events, for instance, can cost upwards of $6,000 to $32,000 or more, according to data from 2009. In January 2021, I personally know someone who incurred over $100,000 for a coronary procedure in northern New Jersey. At a monthly premium of just $500, recovering these expenditures can be challenging.

Accommodating Financial Reality

High health insurance premiums can be overwhelming, especially for self-employed individuals who struggle to manage their finances. Fortunately, options like purchasing insurance through the Healthcare exchange can provide some relief. The federal government pays for premiums through the exchange, making health insurance more accessible and affordable for those with lower incomes.

For self-employed individuals earning six figures, the cost of health insurance can be high. However, obtaining insurance through the Healthcare exchange can significantly reduce costs. It is essential to explore all available options and consider the unique needs of self-employed individuals when navigating the health insurance landscape.

Ultimately, the healthcare industry needs a more comprehensive and equitable system that addresses the complexities of self-employment and ensures that everyone, regardless of their employment status, can access affordable and quality healthcare.