Health scare

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Nightmare scenarios abound for drivers with little or no health coverage, but options for affordable insurance are more numerous than you might imagine.

Marco Garcia of Mission, Texas, company driver for four-truck fleet B&S Transport, once worked as a photographer for the daily Monitor newspaper in McAllen, Texas. When he migrated to over-the-road trucking five years ago, he boosted his income, but lost his health insurance. He still lacks coverage today.

“Too pricey,” he says. “What I most worry about is the welfare of my wife and kids if I get in an accident and I’m not able to work. I may be out there in the middle of nowhere without insurance, you know?”

The U.S. Census Bureau estimates that 30 percent of Americans have little or no health insurance. In the 2004 Overdrive Owner-Operator Market Behavior Report, 25 percent of respondents reported no coverage. Even that may be too low a figure. Russell Fullingim, owner of Truckers Financial Services in California and tax guru at TruckNet, estimates only 1 percent of his owner-operator clients have coverage.

Foregoing health insurance is a gamble that can sink an owner-operator business. Fullingim tells of an uninsured client in his late 50s who was repeatedly hospitalized with pneumonia. “The hospital bills kept piling up. Eventually he lost his truck, then his house. I hear and tell people stories like that all the time. It’s hard to get them to listen, though.”

The key is to shop around for a plan that fits your needs and your budget. Here are some options for minimizing your health care costs.

A majority of owner-operators with insurance (54 percent) are getting their service directly from an insurance company, with or without an agent as mediator, according to the 2004 Market Behavior Report.

The ideal is a comprehensive policy that has low copays (the cash you fork over at the doctor’s office or the pharmacy window), low deductibles (the amount you must pay before the insurance kicks in) and low coinsurance (the percentage you owe after your deductible is met). For a family, the premium on such policies can be far more than $1,000 a month.

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At the other extreme, a high-deductible plan for a healthy, single nonsmoker, age 25, could require a premium as low as $80. High-deductible policies work best when paired with a Health Savings Account, the new version of yesteryear’s Medical Savings Account.

The tradeoff is that you’re responsible for paying that high deductible. But you save money by paying the deductible and other medical bills from an HSA because the money you put in that account is tax-exempt. Yearly contributions into such accounts are limited to $2,850 for an individual and $5,650 for a family. If your tax bracket is 15 percent, you’re saving 15 percent of the money you put into the account in tax you don’t have to pay.

A high-deductible plan protects you against the high costs of a catastrophe such as a bad accident or a major operation. Though premiums will be higher than for a younger person, a high-deductible policy paired with an HSA might make sense for owner-operators of advanced age as well, particularly if the policy has no coinsurance or copays. Frequent doctor visits and prescriptions will meet deductibles quickly, and the rest of the eligible procedures will be covered.

Since Fullingim began his financial services business in the late ’80s after years of being an owner-operator, he has encouraged some clients to take advantage of Section 105 of the tax code, which allows for Health Reimbursement Arrangements. A sole proprietor owner-operator who can establish a legitimate employer-employee relationship with his or her spouse, whether team driving or not, can set up an employer-funded spending account from which to pay medical bills for both people. The entire amount can be noted on Schedule C as a business deduction, rather than as a line item on your 1040. This produces tax savings higher than the standard medical premium deduction for the self-employed.

An owner-operator whose business is a C Corporation can provide his or her own medical benefit and reimburse expenses from an HRA.

Through its BizPlan service, Total Administration Services Corp. helps clients set up and maintain an HRA. It also advises clients on how much to put in each year and represents them before the IRS in case of an audit. The service is $195 a year. “I’ve seen tax savings as high as $6,000, but the average is closer to $2,500,” says TASC’s Kelly Erdman of the HRA benefit versus the standard premium deduction.

Another company offering a similar service (minus the audit guarantee) is HSA for America. Or you can set up such a plan yourself, using software and guides, such as those from CoreDocuments.

Former owner-operator Richard Skoglund of Phoenix, now a company driver for small fleet Davis Trucking of North Carolina, recently became ill while on the road. He made his dropoff and promptly went to a doctor, who told him he had pneumonia.

“They put me in the hospital for two days with the shots and everything else,” says Skoglund, a long-time subscriber to the Owner-Operator Independent Drivers Association’s health plan. “The bill would have been about $6,000, but with insurance it was next to nothing.”

Insurance also is available through most state trucking associations as well as regional outfits such as the Mid-West Truckers Association. The advantage of such plans is that associations are able to negotiate reduced premiums because of the high number of participants. Mid-West’s plan, through the Associated General Contractors of America, offers a range of options, including HRA administration and dental, vision and life insurance.

Other associations, such as the National Association for the Self-Employed and local chambers of commerce, sometimes offer health plans for their members. As with OOIDA and trucking associations, yearly or monthly dues typically are a prerequisite to plan membership.

Leased owner-operators often can buy insurance from their fleets. For example, Dart Transit offers contractors a comprehensive plan in addition to a less expensive plan with a higher deductible and fewer services, says spokesman Steve Gundale. Both plans vary in cost by the age of the insured. Of Dart’s 2,500 owner-operators, 12 percent use one of these options.

Whenever a company offers optional coverage, “the individuals that need it the most are the most likely to sign up,” Gundale says. “That drives up the rates, of course. Somebody new comes in and says, ‘Wow, that’s expensive. I don’t really need it.'” This pattern is a prime reason for the erosion in employer-provided group coverage. It’s also a reason some politicians advocate national, mandatory health insurance.

Pam Henderson of Skiatook, Okla., leased to Crete Carrier, and her husband, Jack, pay about $900 a month into Crete’s comprehensive group health plan. They also have subscribed to TASC’s BizPlan since 2002.

The Hendersons drove team until Jack was taken off the road by a form of multiple sclerosis in 2004. He now works at home as a part-time options trader and as Pam’s office staff. Looking for savings, Pam has researched direct-purchase insurance and considered OOIDA’s plan. But Jack’s condition means the Hendersons want more than just a partial plan, and cheaper quality coverage is a tough prospect.

“It makes it difficult when you have a spouse or someone else who has a pre-existing condition like Jack’s,” Pam says.

Comprehensive coverage such as the Hendersons’ is not for everyone. Carriers have been more inventive with their health plan options in recent years, partnering with various providers to offer plans tailored to specific needs. Dart’s two-tier offering is one example.

Schneider’s TrueChoices is an