If your employer
offers you a health insurance plan, you may not realize the entire amount of
premiums that are contributed per month—until you decide to quit your job
to be self-employed. My husband received a nice benefit package from
his previous employer (an institution of higher learning) and when we
decided to start our own business after our first child was born, one of the
major financial dilemmas we had to face was what to do about health
After discussing our options with my doctor, she
encouraged us to participate in the COBRA plan offered by the University at
least until our daughter was three months old. At that time, we had to
pay $564 per month to remain active with our health insurance company.
Now, I don’t know how your monthly expenses add up…but we could eat,
have air conditioning or heat, cable television and water for that amount
During that three months, we had every insurance
representative we could find give us their sales pitch. Knowing that
we had to cut back on expenses to make our home-based business a success, we
realized that health insurance was unaffordable for the average person
starting out on their own. Every insurance plan presented to us wanted
at least $300 per month in premiums—and most of the plans would not cover
our pre-existing conditions for one year. In effect, we would be
paying over $3,600 in premiums alone (not counting the co-payments for
doctor visits and prescriptions) before the insurance would pick up the tab
on my husband’s sinus allergies or my dermatological allergies.
After some serious number-crunching, we realized that
over the course of a year we paid nearly $7,000 in insurance premiums!
Then, we added up the medical expenses paid by us and by the insurance
company (even the delivery and birth of the baby) and it came to less than
$5,000. The reason for this is that as insured on a group health plan,
the risks are spread out amongst all of the plan participants—some of who
are using more health insurance and some who use less.
We then began to look at our out-of-pocket expenses for
doctor visits. Our baby would need well-baby checkups every few months
and I would need my annual exam and my husband would need his yearly
physical. All of those expenses added up to less than $500 per year.
We could well afford to pay the doctors directly for
our care compared to paying an insurance company “in case” we needed
With that decision made, we moved on to major medical
insurance. This insurance usually has a higher deductible than health
insurance in exchange for lower premiums. We found a well-known,
reputable company that offered us a major-medical insurance policy for less
than $110 per month with a $2,500 deductible. The only catch was that
the major medical would not cover pregnancy—but, we could live with that
while we raised our first child and our first home-based business.
Over the course of that first year, we created our own
medical savings account and set aside $190 per month. We were also
able to take some tax advantages by purchasing the insurance through our
company. At the end of that year, we had nearly enough saved for
an emergency deductible in case of hospitalization.
But, despite the shock of health insurance premiums
making us sick…the inevitable happened. No, not an emergency
appendectomy. I became pregnant with child #2 and we made the decision
for my husband to return to full-time employment. The University he
works for now picks up the entire cost of premiums but we still have our
medical savings account that we started nearly five years ago just in case
the high cost of health insurance makes us sick again!
About the Author:
is a wife and mother of four children ages four
and under. She has a degree from Mizzou in Human Environmental Sciences,
Consumer Economics and Management, Personal Financial Management.