In this article, we’ll tackle the question about what to do if you’re someone who is retiring, retiring early, or going into semi-retirement to start a second career in a startup company or an ongoing small business.
Frequently, people tell me that they’re staying in their job due to concerns about health insurance and whether they would be able to afford it or qualify if they move on. There’s good news on this front - more options are available than most people are aware of - and the options provide varying rates and guaranteed issue in many cases.
Age and higher rates
Age is a factor in states that allow medical underwriting (the practice of adjusting the amount you pay based on health condition). Even states that don’t allow medical underwriting to determine rates still rate on age and gender. However, I’ve seen that age doesn’t affect rates as much as other personal factors, such as pre-existing medical conditions, weight, tobacco use, and plan factors such as whether maternity is included, the amount of deductible, coinsurance, and copayments (if applicable).
My informal, unscientific rule of thumb is $20-$30 a month for every 5 years of age. This is in addition to any possible increases in premiums due to increasing costs of care, which have been anywhere from 5-10% on average, with some plans much higher, and even a few plans with rates going down annually.
Medical conditions and higher rates, or worse, not getting coverage at all
Do you have concern over higher rates and possible rejection of coverage if you have a preexisting medical condition? That concern may be justified (and it may not). Each company makes their own undewriting guidelines that fall within the laws of your home state. This means that folks such as those living in Maine, Massachusetts, New Jersey, New York, and Vermont will be able to buy health insurance regardless of their health status.
Others may find that certain conditions, as minor as acne medication, may lead to increases in rates or rejection of a health insurance application. But these have to do with individual health insurance, whether sold to an individual directly or as part of an individual purchase of association group health insurance.
As part of a small business, you have an ace up your sleeve. It’s small group health insurance, sold to small businesses, including startups, with groups from 1 or 2 employees up to 50. Whether it can be sold to a group of 1 depends on the laws in your state, and also the structure of the business and revenue are taken into account.
If you’re formally organized in a legal structure such as a Corporation or LLC, are adequately capitalized, and will be able to make enough money and/or have enough money invested in the business to pay for health insurance, then you should be able to pursue this option. It’s really not too hard! You’ll have plenty of insurers to choose from and can be guaranteed health insurance regardless of medical conditions.
Future rate increases will be due in large part to the utilization of your policy; If anyone on your small group policy makes large claims, expect your rates to go up at the next renewal period. If they don’t, perhaps the rates will remain level or possibly go down - it all depends on the insurer and how they do business. A qualified agent will be able to help you make sense of your options. Information on how to find a health insurance agent can be found at my website.
Eligibility for Medicare
If you’re 65 or older, then you have the option to use Medicare. This can be a great start to health insurance coverage, though you should look at Medicare supplements. This is because Medicare doesn’t cover everything, even if you sign up for both Part A & B, and pay the monthly amount for Part B. You’ll want to consider Medigap versus Medicare Advantage choices, and possibly separate prescription coverage with Medicare Part B.
Mixing and matching the various types of coverage
One important thing to remember is that you can cover each family member separately or together, and you can mix and match the various types of coverage. For example, if you’re near to Medicare, and plan to start a retirement business, you may be able to take advantage of Medicare A&B with a Medigap supplement, your younger spouse may be able to sign up for an individual policy or get coverage from an employer, and your teenage/college age children could each get a separate individual policy.
Joining an association to get insurance, better rates
Association group health insurance, with guaranteed issue health insurance is virtually gone from the marketplace. This is due to the failing of many association groups in what has been termed the “death spiral”. This term refers to the notion that rates go up due to medical needs by members, and the healthier people will leave.
In the end, only folks with high medical needs are left in the group, which is no longer viable or affordable. These people are then left uninsured and in some cases can’t get health insurance at all. According to the Journal of Insurance Regulation, there are still a number of problems with this type of insurance, so I’d exhaust other options before checking this out. Remember, if you have to join an association or pay additional monthly fees or dues, or you are issued a “certificate of coverage” rather than an “insurance policy,” it’s association group health insurance.
Finding health insurance for a second career startup can be a bit of work when older age and possible medical conditions are part of the mix. But checking all of your available options can save large sums of money and frustration with an insurer.
Other articles I’ve written for StartupNation on Shopping for individual health insurance and shopping for small group health insurance will ensure that you’ve covered all your bases, and making use of my online health insurance resources can ease the burden and help to make the right choice. Once you’ve got your research and plan in place, if you’ve done it right, you only need to do an annual “checkup” on your health insurance and can focus your attention on your startup business.