Got health?

Many owner-operators choose to skip health insurance as it gets further out of reach. Find out your options for coverage at a price you can afford.


ONE WAY TO MANAGE HIGH DEDUCTIBLES

Since the cheapest health care coverage carries high deductibles, owner-operators with such policies are in a bind to pay for the first several thousand dollars each year. What many don’t know is that a little-used tax provision makes it easier for disciplined savers to meet those deductibles.

A Medical Savings Account allows you to save, tax-free, money that you’ll use later for medical expenses. Not only do you save on taxes, but if you invest the money wisely, it will produce tax-free earnings. MSA funds can be used to pay for a policy’s deductible or for expenses such as eyeglasses or dental care that might not be covered under a policy. There are tax penalties for withdrawing money for non-medical uses.

Many owner-operators are afraid of the high deductible and fail to realize how much they can save through lower premiums. With traditional coverage, if you don’t get sick, you lose the money paid in high premiums. But with the money placed in a Medical Savings Account that is not the case, says Kevin Rutherford, president of The Alliance, a company that specializes in helping people set up health insurance plans. “If nothing happens, that money is yours,” he says.

Account funds roll over each year with no penalty. Once you hit retirement age, the money can be withdrawn as if coming from an Individual Retirement Account.

Four years ago, when it was time for then owner-operator Rick Murray of Huachuca City, Ariz., to renew his health maintenance organization policy, he discovered he was going to have to spend about a quarter of his income on health insurance.

“I knew there had to be an alternative,” says Murray, who then set up an MSA.

Murray liked having most out-of-pocket expenses covered by MSA funds and then having insurance pay the rest once his deductible is reached.

Congress has twice extended MSA legislation that was passed in 1996. After Dec. 31, 2003, no more accounts can be established, but existing accounts can continue, Rutherford says.

MSAs are available for self-employed individuals (and their families) and those whose employers have no more than 50 employees. To start an MSA, you must first set up a high-deductible health plan. MSAs have minimum and maximum limits on deductibles, as well as other limitations, and require expertise to set up. Check with your accountant if you are interested in establishing one.

– Javacia N. Harris

Julie Martin is nervous. In October, she went to a hospital emergency room for a breathing treatment related to her chronic asthma. The bill was more than $800 because neither she nor her husband, Joe, have medical insurance. That bill may be the least of their worries: Joe, a trucker, needs a hip replacement. Julie has other health problems.

“But what scares me is we’ve got two children,” Julie Martin says. Joe, who drives for an owner-operator with five trucks, had insurance last year, but when his boss switched plans, the Martins were denied coverage by the new insurance carrier. While they consider their options, the potential that a medical disaster could strike weighs heavily on their minds, as it does for the 41 million Americans who have no health insurance.

Like the Martins, many truckers – especially owner-operators – go without insurance for various reasons. They can’t qualify for it. The premiums are too expensive. Deductibles are too high. Coverage is too weak. Those who get a policy often pay thousands of dollars a year in premiums and thousands more to satisfy high deductibles.

When owner-operators do find health insurance, it usually isn’t that good, says Don Schaefer, executive vice president of Mid-West Truckers Association, which offers health insurance among its services. “The way the marketplace has been the past few months and years, health insurance is getting more expensive, and there’s less of it out there,” Schaefer says. Premiums have had double-digit increases in recent years and rose 13 percent last year.

While the situation is dire, there are many ways for owner-operators to get at least a minimal level of health insurance or, for those who have coverage, to reduce their costs. Here are the basic options:

YOUR SPOUSE. If you’re married and your spouse can get family health coverage, take advantage of it.

YOUR COMPANY. If you’re leased to a carrier, you may be eligible for its group policy, though not in the same way as an employee. You’ll pay all of the premium – the employer’s share plus what an employee would pay – plus a fee for processing. Check with your accountant to make sure the plan doesn’t endanger your status as an independent contractor.

JOIN A GROUP. By pooling drivers, organizations such as the Owner-Operator Independent Drivers Association and the Mid-West Truckers Association can offer discounted rates, although premiums are still much higher than what a company driver at a large company would pay. However, as of late October, neither of those organizations was writing new policies because they were renegotiating their contracts in the hopes of getting better coverage and premium prices.

In OOIDA’s case, insurance carriers have wanted to increase members’ rates, cut benefits or refuse to grandfather the enrolled OOIDA members. “Truckers are considered a high risk to the insurance industry,” says Brenda Reynolds, OOIDA’s medical benefits supervisor. “Coverage is hard to get or the carrier rates it up too high.” OOIDA has 2,200 of its 85,000 members enrolled in its major medical plan,

Trucking associations aren’t the only group option. Small business associations and chambers of commerce offer insurance for their members; so do some unions, churches, guilds and social organizations.

AGENTS. An independent agent may be able to find you a better policy than you would get on your own. The agent should tell you what companies he represents and be willing to work up quotes without strings attached. To locate agents, ask truckers who they use or consult the Yellow Pages. The Association of Health Insurance Advisors can also provide you with the names of agents in your area.

BUY DIRECTLY FROM THE INSURER. A few insurers, such as True North Companies, specialize in writing policies for truckers because they also provide truck liability insurance. Several companies offer free quotes on their websites.

“Ninety percent of the owner-operators I talk to don’t have any insurance,” says Peggy Duncan, a marketing representative with True North Companies. “Either they’ve gone along without it for 20 years, and now they’re panicking because they’re in their 40s, or they are company drivers flipping over to the owner-operator side.”

Her company offers 15 plans, each tailored to truckers’ needs. “Owner-operators are all looking for catastrophic coverage,” she says. “They would love to be able to have a plan that would cover all kinds of routine services. But those are too expensive.”

Owner-operators often can afford only a plan with a high deductible – $2,000 to $5,000. After meeting the deductible, the policy holder pays a portion, often 20 percent, of the medical bills. “A plan with that kind of deductible saves them $300 to $500 a month in premiums,” Duncan says.

High-deductible policies are especially helpful if you rarely visit the doctor. Policies are available with deductibles as high as $10,000. However, if you raise your deductible too high, you’re in effect getting out of major medical coverage and into catastrophic coverage – a safety net to cover a heart attack or cancer treatment that produces six-figure bills. If you’re older than 40 with a family history of medical problems – or anyone who is likely to use health care on an ongoing basis – you might not want such a high deductible because you would have to meet it every year before you begin to receive benefits.

Lars Holfve, a general contractor in Cape Canaveral, Fla., turned to high-deductible insurance as one solution when he had trouble finding affordable coverage during his 11 years as an owner-operator.

“I got hospitalized for food poisoning four times in 11 years,” Holfve says. “I had insurance, but then I had more of a regular 80/20-type thing. I had to come up with the deductible out-of-pocket. Anything less than $4,000 I had to pay for it. That was a serious problem.” Eventually his declining health and high health insurance premiums forced him off the road.

Holfve’s experience is not unusual. Monthly premiums for truckers can often start at more than $200 for an individual and more than $500 for a family, but they can be much higher. A prospective insurer will look at risk-related items when deciding whether to offer you coverage, and if so, how much the premium will be. These items include weight, smoking and drinking habits, age, personal and family medical history, and occupation. Even the ZIP code of your home can make a difference because health claims vary from state to state, even neighborhood to neighborhood.

One bright spot among the rising costs is a sizable tax break. For the 2002 tax year, independent contractors can deduct 70 percent of their premiums. That rises to 100 percent for 2003. Assume you have a family policy with a moderate deductible that costs $10,000 a year in premiums. If you’re in the 27 percent tax bracket for your 2003 taxes, you can knock $2,700 off your bill.

Furthermore, if your medical expenses exceed 7.5 percent of your adjusted gross income, you can itemize them as a deduction, says Perry Wiseman of Omaha, Neb.-based Truckers Accounting Service.

“All of out-of-pocket medical expenses, the extra 30 percent of health insurance premium not currently deductible, co-pays, drug co-pays, prescriptions, eyeglasses, contacts, dental expenses, emergency room visits – anything related to health care is deductible once you reach that 7.5 percent threshold,” Wiseman says.

Many owner-operators see little point in health insurance, says OOIDA’s Reynolds. “They tend to ignore stuff a lot more because they’re on a tight schedule,” she says. “They’ll get their truck fixed, but you can forget about their body.”

It’s easy for some owner-operators to accept such risk – until something major happens.

A simple appendectomy can cost more than $10,000. Heart surgery can go as high as $100,000. And what happens if you’re without insurance when you’re diagnosed with a chronic illness such as diabetes – a disease that could wreck your health, end your career and create a pre-existing condition that makes it nearly impossible to get coverage?

“When you’re young, the odds say you’re not going to get hurt or sick,” says Mid-West Trucking Association’s Schaefer. “If you’re middle-aged with a family, you can’t go without it. How are you going to provide for them if you get sick? How will you stay in business?”



WHEN YOU CAN’T GET COVERED

If you have a pre-existing condition or are such a high risk that insurers will not cover you, there are still options:

  • Most states offer an uninsured medical coverage to high-risk residents. Contact your state insurance department to find out if you qualify for such a pool.
  • If you and your spouse can’t get insurance but you want it for your children, your children will probably be eligible under Medicaid. Call (877) 543-7669 or visit www.insurekidsnow.gov.
  • If you’ve had insurance but are now denied, you may have legal redress. Recent changes to the law make “portability” – continuation of coverage – easier, though not always for independent contractors. Visit coveringtheuninsured.org/individuals/ for legal help.
  • There are some non-traditional programs that accept everyone. They don’t qualify as major medical coverage, but they can reduce costs.
  • One is True North Companies, which offers a Truckers Service Association, a sort of reversed fee-for-service plan. The policy pays the first $60 of every doctor’s bill. If the visit costs $75, you pay only $15. Premiums run between $150 to $250 a month. True North can be reached at (319) 366-2723 or www.truenorthcompanies.com.

    Another non-traditional program is Care Entrée, which is not an insurance plan. It helps its clients by providing the negotiated rates that large insurance companies receive from doctors, hospitals, dentists and pharmacies. Many of the savings range from 15 percent to 50 percent, the company says. It also assists clients by helping them determine the cheapest health care provider in a given area. Its rates start at $65 a month. Care Entrée can be reached at (972) 522-2000 or www.careentree.com.


    HEALTH PLAN TYPES

    Insurance providers offer dozens of plans, but generally they fall into three categories:

  • HEALTH MAINTENANCE ORGANIZATIONS. In HMOs, individuals pay a fixed monthly fee for services instead of a separate charge for each visit or service. The monthly fees remain the same, regardless of types or levels of services provided. Services are provided by doctors who are employed by the HMO or under contract with it. The HMO pays those physicians a set fee per patient. HMO premiums tend to be the cheapest, but coverage and choice of physicians can be limited.
  • INDEMNITY HEALTH PLANS. These are the traditional “fee-for-service” plans that have existed for decades. After meeting a deductible, you pay a percentage of the cost of health care services – often 20 percent – and the insurance carrier pays the rest. Such plans usually allow you to choose the health care provider.
  • PREFERRED PROVIDER ORGANIZATIONS. PPOs typically have the best of the two prior plans – discounted rates for physicians who are inside a limited network and access to physicians outside the plan, though at a higher rate.
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