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Listen Up, Hypochondriacs By Stephen J. Butler

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When I hear about the rising cost of health insurance premiums, I'm reminded of Jerry Lewis in an old movie, "The Orderly." Jerry is a hypochondriac who finds himself exhibiting the symptoms of whatever ailment each of his patients happens to have as he walks through the ward. In today's version of the movie, Jerry would be afflicted with only the diseases of the UNINSURED patients under his care. He would be a poster boy for those who have fallen through the cracks of our health insurance system.

Anyone saving for retirement needs to continually monitor their health insurance situation and that of their family members. A few years ago, I wrote about an acquaintance whose early-twenties daughter was in an automobile accident that left her paralyzed. She had no insurance at the time. Her bad luck has turned into a financial disaster for her family. Yet, it is easy for those of us with the best intentions to overlook some conversion deadline when changing jobs or to forget that a child no longer in college full time is no longer covered under our family health plan. Even continuing to pay premiums is sometimes not enough. If someone is ineligible and hit with a major illness, the insurance company just refunds whatever premium they inadvertently collected.

There are three common situations that expose the average American to a lack of insurance. The obvious is a change of jobs. If you work for a larger company, there will be an extension of benefits under COBRA, but the cost of maintaining a former company's coverage is usually so great that many people tempt fate and go without insurance in hopes that they will be covered soon with a new employer. Next, a growing number of young people are finding themselves between jobs more often than they would prefer, and they run a high risk of being uninsured. Shuffling between jobs, college, graduate school, and other temptations leaves many younger folks in limbo with regard to coverage.

Next, the rising cost of covering dependents will force many employees to drop this coverage. With insurance rates predicted to increase substantially over the next two years, most employers have been forced to pass some or all of the increase on to the employees who typically had their premiums paid in full. Then, where dependent coverage is paid entirely by the employee, the 40% rate hike will fall squarely on the shoulders of many who will be forced to forego the coverage.

Finally, we have a growing subset of the population working in non-traditional relationships with corporate America. Over one-third of all Californians are working as single independent contractors, or else they are in relatively small businesses working for themselves. These folks have little or no access to traditional group health insurance plans offered by employers who supposedly benefit from some economies of scale.

The fundamental problem with insurance coverage is that you can't get it after you become sick or injured. You apply for and buy policies when you can demonstrate that you are a "standard risk." The time to consider what the future might bring in the way of insurance coverage is when you are in good health and can review every possible option.

Another basic axiom with regard to insurance is that it never pays to insure a risk you can afford to pay for yourself. For what might be small, every-day claims, you can pay those out of your pocket rather than trading dollars with an insurance company and paying what could be as much as 30% or more for their cost of overhead, billing, marketing, etc. The situations outlined above which lead to exposure and a lack of coverage can be met relatively inexpensively by individual coverage using high-deductible plans. I currently pay about $8,000 a year today as my proportionate share of my company's group policy covering my wife and me. We are in our late fifties. I could purchase a $2,000 deductible individual plan that would cost about $4,000 for the two of us. Its maximum benefit is $6,000,000.

For my two children, in their mid-twenties, I have purchased a $2,000-deductible plan that costs me about $30 a month for each. Why do I pay for them? Because my daughter is a sailing journalist who has had about five different jobs since college. My recently-graduated son has already had two jobs, neither of which offered insurance coverage. I want to sleep at night, so I have the premiums deducted automatically from a checking account. I'll settle up with them later?much later. One of them will surely have a spare bedroom years from now which my wife and I will treat as our assisted living center, and I plan to bring up the subject then.

Meanwhile, a younger employee asked to pay for family coverage would do well to forego the offer and consider buying high-deductible individual coverage for his or her spouse and children. The money saved could be used to increase the 401(k) contribution. With any money to speak of in a 401(k), the average family has the resources to pay what might be a $2,000 deductible during an unlucky year. Remember. We can all borrow from our retirement plans at any time and for any reason. Accessing the money through the loan provision does not trigger a taxable event. Retirement money is not sacrosanct. It is part of the matrix of your entire financial plan.

Having your own individual coverage may save you money while guaranteeing coverage as you maneuver through the sifting sands of today's job market. High-deductible plans charging under $30 a month for children provide coverage that is affordable even for people out of work.

And finally, nothing is worse than entering a hospital with no insurance. Like a lamb to the slaughter, you are charged the highest possible rate for everything when there is no insurance company "buffer" with its pre-negotiated fees. The place to start for information and rates on individual health insurance is www.ehealthinsurance.com. Check it out.