Ask HN: What do founders do for health insurance?

https://news.ycombinator.com/item?id=560169

by lionheart • 17 years ago

38 61 17 years ago

news.ycombinator.com

The health insurance issue has been plaguing me for a while and I wanted to see if maybe some other founders on HN have the solution.

Health insurance is one of the most important "benefits" that is included in having a corporate job.

So what do you do when you quit your job to start your own company?

Everything I've seen so far costs in the neighborhood of $1,500 a month for a family of four. That's a huge payment when you're just starting and have no income.

Is there a better solution? What do you use?

icey2• 17 years ago

I don't know what part of the country you're in, but you should contact a broker. They can give you a bunch of options and tell you what all of the options mean.

Personally, I'd prefer an independent broker than someone who worked for a big firm like State Farm or the like.

As an additional note, you don't pay anything extra for using a broker; the carrier pays them additional money directly. All the carriers will have similar override agreements with a broker, so you don't have to worry about the broker being shady. They only get paid for as long as you have the policy, so it is in their interest to match you with a policy that you will actually keep.

If you're concerned about costs, ask about an HSA. Make sure you understand what an HSA actually is before you decide to go with one, though.

[Edit: I forgot to mention that I'm in the the brokerage portion of the health insurance industry; before I worked here though I used a broker and he saved me about 500 bucks a year.]

lionheart2• 17 years ago

That sounds like a good idea. Any tips on finding a broker in my area?

icey2• 17 years ago

What state are you in?

green• 17 years ago

You always can find something cheaper than that! You may want something more expensive for the kids, but for healthy adults you can pretty easy get away with like $300-350 for both -- use sites like ehealthinsurance and others -- they can do comparison for you. Of course, if you have some medical conditions/etc. - that can be an issue, as then the cost of insurance will be sky high.

After all, yes, health insurance IS expensive, but you can find the cheaper options. But well, the same way you can think about your rent, groceries, etc. You have to have them, and you have to pay for that.

run4yourlives2• 17 years ago

I'm in the employee benefits field up here in Canada. While we're different, I support small businesses and they have the same concerns regarding costs as you would, albeit at a much smaller scale.

Take this knowledge with a grain of salt, given the systems, but one way you could control costs is by looking into a Healthcare Spending Account (HSA) - I believe the US equivalent would be a Health Reimbursement Account (HRA).

This allows you to set a max contribution limit, but it automatically caps your claims to the money in the account. If you paired that with high deductible catastrophic insurance, you may come out ahead. Wiki has a good set of info: http://en.wikipedia.org/wiki/Health_Reimbursement_Arrangemen...

Other than that, I think you are SOL in terms of paying the big bucks. Health Coverage is one area where the US is simply lacking in my opinion, compared to the rest of the world.

Good luck to you. You should definitely contact a local broker or two and have them walk you through the different options. There is a lot of stuff out there that is simply too crazy to understand and is best handled by a pro.

thinkcomp• 17 years ago

There is no good solution. The American health care system is unfortunately presently designed to work against entrepreneurs and small business owners. In most states including California, you must have at least two full-time employees to qualify for group health benefits.

http://www.aarongreenspan.com/essays/index.html?id=11

run4yourlives2• 17 years ago

There are a lot of ways around these laws - a broker should be able to help out here.

PStamatiou• 17 years ago

Before I graduated college I got a year of health insurance under a student plan that keeps working after I graduated. I graduated in December and it runs out in ~August. So I'll be in the same boat soon enough..

jws• 17 years ago

When I sold my company I had to break my family apart for health insurance. My children are in the state subsidized high risk pool and I was able to find one company that would take my wife and myself without the children.

vaksel3• 17 years ago

Cross my fingers and hope I don't get sick. I do try to stay in shape(workout every day 1-1.5 hours) and eat healthy. But I just can't justify paying for health insurance at this point.

tptacek4• 17 years ago

Which is why any sane health care reform will likely include a mandate requiring people like you to carry coverage; insurance works best with a large pool of risk, where coverage isn't biased towards those at most risk of making claims.

That's not a dig at you. You might be right that there's economic rationale for you to carry coverage; the risk is remote and the cost is high. That's a problem the system needs to fix.

fauigerzigerk• 17 years ago

If you fix it, try not to break it. In some european countries people shy away from starting a startup because social security contributions are very high from day one even if your income is near zero (Not so in the UK fortunately)

It's actually pretty simple to get right. Everyone must be in and everyone must pay proportional to their earnings. The key is not to have minimum contributions because that's what kills you while you earn next to nothing.

tjic• 17 years ago

> Which is why any sane health care reform will likely include a mandate requiring people like you to carry coverage; insurance works best with a large pool of risk, where coverage isn't biased towards those at most risk of making claims.

The point you make is technically true, but seems a bit bizarre.

It's like saying "if we had an financial instrument that paid for people's airline tickets, we wouldn't want to allow people to choose to join or not join - if we did that, we'd just have all the people who like to travel a lot join, and it would cost a lot! So what we really need to do is force EVERYONE to contribute, so that there are a lot of people who get no benefits who can subsidize those people who draw a lot of benefits".

Yes, you're right - unless we do that, people who draw a lot of benefits will have to pay for a lot of benefits.

...but it seems a bit morally autistic to me.

rarrrrrr• 17 years ago

One easy thing to do in this situation is add medical payments coverage to your auto insurance. It's maybe $20/6 months, and covers what is for many people the most likely cause of injury.

Injury only or highest-possible deductible health insurance is also a good option if you're generally healthy.

agotterer2• 17 years ago

I was doing consulting for a few months and considered not getting insurance. I decided to take the safe route and payed $550 a month out of pocket for personal coverage. I eat healthy and exercise (on and off). Long story short, I ended up hospitalized for a week with some crazy stomach infection. To this day, no doctor knows what it was or how I got it. The bill would have been 50 or 60 thousand dollars if I didnt have insurance. Better to be safe then sorry, accidents do happen. I will always get the best coverage possible now.

vaksel3• 17 years ago

if you didn't have insurance, that bill would have been 5-10K, with the hospital willing to give you 10-15 years to repay it.

mechanical_fish• 17 years ago

Living in Massachusetts, where you can buy group health insurance through the state, really helps.

kgrin2• 17 years ago

I'd second that, and add that pricing is particularly competitive if you're 26 or under (which I realize the OP probably isn't if s/he has a family of 4, but it might apply to others).

This is one of the more startup-friendly features of living in MA as opposed to the Valley.

sachinag• 17 years ago

Yeah, I'm a bit surprised that startups that haven't been able to get recent angel funding in CA haven't moved to MA just for this reason. (Again, all else being equal, no family restrictions, etc.)

redrobot50502• 17 years ago

I can't help with the family situation, but have you considered "catastrophic" insurance through a professional group like the IEEE or ACM?

They have plans as low as $90/quarter that have a $5k deductible. Not good if you come down with frequent colds, coughs, flu, etc. It is good if you're in a car accident and fracture your leg in 2-3 places. Or slip on ice and hit your head, etc.

white• 17 years ago

I thought that professional groups don't have such plans anymore.

redrobot50502• 17 years ago

Its entirely possible. My first company did not offer health insurance. The president just made sure to pay himself enough so that he could secure health insurance for the rest of his family.

He advised us to take our (start up wages) and buy catastrophic disaster insurance. Or relax, because our car insurance also covers medical bills, so if we're in a car accident (most likely scenario) we're covered.

[He then also told us (off the clock, and again this was 2004) that if we voted for John Kerry, the health care reform would put our company out of business. ]

But yes, in the past 5 years they could've gone away.

mace• 17 years ago

I never knew ACM, IEEE and others offer insurance. Here are the direct links to their benefits page:

ACM: http://www.acm.org/membership/insurance

IEEE: http://www.ieee.org/web/membership/financial-advantage/insur...

tptacek4• 17 years ago

Been there.

$1,500/mo is a typical quote for "normal"-deductable health insurance. If you're a young family, that's not what you want; you want high-deductable health insurance, which has a low monthly payment but effectively means you're paying for all your doctors visits and medications out of pocket.

The real goal of insurance is to keep you from going bankrupt over appendectomies and broken bones. You can afford to pay your pediatrician yourself.

If you have a qualifying high-deductable plan, you can also create an HSA account and fund it to pay for routine health expenses; those costs are then tax-advantaged.

I agree with the other posters that recommend brokers. Especially for a family, you can wind up in a rats nest of preexisting coverage denials if anyone has ever been to the hospital before. I got the sense that insurers simply don't like covering women who might have children. Brokers will not resolve this problem for you, but they'll make most of the paperwork go away.

Couple more thoughts.

First, there may be an engineering union style group you can join to get health insurance from. Jeremy, one of my NYC partners, had a group like this he got coverage through. So look around for things like that.

Second, beware of temporary/month-to-month insurance, which reputable insurers offer very cheaply. It doesn't take a lot of thought to see why this is a bad deal: they're under no obligation to pick you up once the term ends. If you get sick April 29th and your plan runs out April 30th, you're completely fucked.

Matasano got group coverage (through United, and I'm not a fan) a couple years ago. It made hiring much easier; health insurance was often the first question candidates asked, before base comp. Be aware that group coverage isn't a magic bullet either. What it does is make preexisting condition issues go away. But it isn't cheaper than what you can get on your own.

yummyfajitas• 17 years ago

I got the sense that insurers simply don't like covering women who might have children.

This is probably because of an adverse selection problem: childbirth is usually planned (unlike serious illness). This means families planning to give birth are more likely to purchase insurance.

Is it possible to avoid the adverse selection problem by purchasing health insurance which does not pay for childbirth or childbirth related health problems?

ams61102• 17 years ago

Yes it is, in fact the last time I bought an "individual" plan for my family maternity was explicitly NOT covered; adding it would have made the premium much higher. I paid about $400/month for spouse and kids; I had my own coverage at work but they did not provide family coverage.

If you KNOW you don't need maternity coverage that saves you a lot of money, but don't have any "accidents" as childbirth will cost you many thousands, up to hundreds of thousands if there are complications.

silencio• 17 years ago

I wish, because otherwise I would gladly take advantage of that, but I've never seen such an option available (then again, my plan is individual, not family...). Meanwhile, I'm getting sent brochures from Anthem (my health insurance provider) about pregnancy and prenatal care. You'd imagine that's a bit lacking in tact if the only health related things that have stayed constant in my life for the past several years are allergies and hormonal contraceptives.

mdakin• 17 years ago

Wow, it's much cheaper if you're a single male (no maternity benefits included) in Calif. at least (and Wyoming and Mass. from experience). I have a Blue Cross PPO right now for $85/month. They are upping the rate to $140. I will be leaving on principle.

I plan on getting a high-deductible/HSA plan. If the deductible is $X I will put $X into an HSA. Thus any care I might need over the next year will "feel" free. If I'm lucky and my current health trend continues I will not need to take any money out of the HSA. And it will simply be a tax benefit. In future years I'd replenish the HSA up to or over the deductible level of whatever my present plan is.

I would look at the high-deductible/HSA options. Assuming you have the cash around to buy the policy and stock the HSA with cash you'll not have to worry about health bills until next year. Psychologically, this could be comforting. Whether it makes sense probably depends on how much you and your family actually use insurance. And the specific costs of the plans available to you.

eventhough• 17 years ago

I use Tonik. It may not be right for a family of four but for a young single guy it works well enough.

https://www.tonikhealth.com/

sr3d• 17 years ago

Nice! I'm considering moving to CA to work on my Startup. Tonik seems decent for health and dental, at least it will fit in my budget even though with a big deductible number. Thanks for sharing.

philwelch• 17 years ago

For some reason the health insurance industry has settled on a model of "pay your health insurance company scads of money and pay relatively little for the rationed routine care you get". Since health insurance is a heavily regulated market, I doubt this is the most market-efficient solution. Maybe if you shop around for routine care and offer to pay with cash (or HSA) it won't end up costing as much, and I've seen informal studies done by friends that show, for instance, that certain prescription drugs cost hundreds of dollars less at different pharmacies (once you can coax the pharmacies to actually tell you the price, since they're so used to working within the insurance cartels).

It all depends on your health, too. If you have sleep apnea and want to get it treated, that's hundreds of thousands of dollars if you don't have insurance. Probably better to get a full time job for a few years until your apnea is treated. If you have hypothyroidism, you can take remarkably inexpensive prescription drugs and get an annual checkup for cash cheaper than you can get insurance to cover the thing.

My working hypothesis is that high-deductible catastrophic insurance is the best solution for broke, comparatively healthy adults. In this model, you're using health insurance as insurance qua insurance, to make sure you don't go bankrupt if a medical emergency costing more than $10,000 happens to you. (This of course requires you to be able to raise $10,000 if something DOES happen to you.) This does nothing for drugs or routine care, and needless to say there is no dental plan. I pay $40 a month for this. I don't get anything out of my $40 a month, but on the same token, insurance qua insurance is something you pay for but you hope you never have to use. An HSA is not a bad feature if you're going with this model.

Depending upon state law, you can leave out things like maternity coverage, or get further discounts if you're in good health. A good female friend of mine doesn't have maternity coverage but she is very aggressive about birth control and has no qualms about abortion, though, so I would carefully consider whether this also applies to you or your spouse. I would also hasten to add that if there's a possibility of having more children, the expense of health insurance is not your biggest problem here.

In fact, I don't know how well this model works if you have kids. Or how founding a startup works if you have kids, for that matter.

mrkurt• 17 years ago

The best solution was (for me anyway) to treat insurance as insurance instead of a health care plan, and take advantage of all the tax breaks I could for doing so. I put my family on a $10k deductible plan, primarily to cover catastrophes. This gave me two things: negotiated rates for health services (typically a 40-60% discount) and eligibility for an HSA. The plan ran us $190/mo.

Now, $10k is kind of a scary number for something like that, but I felt comfortable with it given that we'd never have to write a $10k check. At the very worst we'd rack up a $10k debt to a hospital or something, which (given the current state of healthcare) we could reasonably expect to pay off over like 15 - 20years. It seemed reasonable to me, for what we needed.

The HSA is helpful because it's effectively another IRA you can use for pretty much any medical expense. So for normal health care, we ended up paying about 40% of the "list" costs for things, and pre-tax.

Doing this requires that you be a little aggressive about getting good deals on care, though. My daughter broke her arm about three months in to this, so we took her to a minor emergency clinic. I told them what was up and they "coded" the visit at a much lower rate than it would have been. The next day, we actually called around to find out what people were going to charge us for a real cast to replace the splint the clinic put on. It worked out to be about $600 total, including the minor emergency clinic visit.

So in summary: get coverage for catastrophic health events with a "cheap" plan, abuse the negotiated rates that plan gets you, get an HSA, and be an intelligent consumer of health care. Oh, and minor emergency clinics are your friend.

dustineichler• 17 years ago

To follow up on this thread, what health insurance do contracts get? I'm looking for something for myself. Thanks.

_-TIMMY-_• 17 years ago

I joined the National Guard and am now eligible for Tricare Reserve Select. Approximately $180/month for the whole family [wife,kids,self] with a low catastrophic cap.

smokey_the_bear2• 17 years ago

We got a Kaiser HSA. If you live near a Kaiser hospital they're a pretty good deal. I don't have any kids, but they seem like they're much more family friendly than some of the other low cost HSAs. They cover full maternity, and cover a few well checkups a year for kids, and one for adults without hitting your deductible.

coopr• 17 years ago

Kaiser tends to get ranked FAR ahead of all other health insurance / health provider companies in the consumer surveys I've seen - and their rates tend to be very competitive. Your broker may not quote Kaiser rates, though - you might have to inquire directly.

smokey_the_bear2• 17 years ago

I especially liked how clear their pricing was. There's a place on their website where you can look up exactly how much each procedure costs. I'd never seen anything like that before. It made it easy to weigh the HSA vs traditional plans.

josh_nyc• 17 years ago

In New York State, try the Freelancers Union. http://www.freelancersunion.org/insurance/index.html

I used this a few years ago while working for a startup and I got a full plan (comparable to the average full-time job's plan) for half price (at that time, around $250 a month).

Worth a look. They are always expanding and trying to provide more and more benefits for the W2-challenged.

biohacker42• 17 years ago

This is one of the few big pluses Europe has over America for startups. Unfortunately it's not nearly enough.

SoftwareGuy• 17 years ago

When I started my own company I bought health insurance. If you can't afford it, you can't afford to start your own company. No different really from other expenses like equipment and such.

tirrellp• 17 years ago

When I paid for private health insurance, My premiums were around $450/month for a family of 3. This was (if I recall correctly) and 80/20 plan with a $1000 deductible. I then dumped $1000 into my HSA and I was set.

marc092• 17 years ago

It is worth finding out what your state's family services covers, especially if you are low income (about $45k/year). Depending on your income your kids and even you might qualify for medicaid. There are also dozens of other programs around. I live in Ohio and there are programs for pregnant women, disabled, blind and aged. There are programs for emergency care for aliens and the hospitals usually will give discounts for low income. If that is not enough there are lots of cheaper and even free clinics for health and dental care, around here they generally work on a sliding-scale based on your income.

wastedbrains• 17 years ago

We both were health young guys with no families that needed to be covered and just ended up getting Tonik health insurance.

During hiring we mentioned that we would cover up to X amount of personal health insurance. Since our hire had a family though we are now looking at getting a group plan even though the company only has 3 people, the man reason was getting family plans is much harder to get cheap personal plans while the group plans have better benefits for families.

mixmax• 17 years ago

Move to a country that takes public healthcare seriously.

I'm only half joking after reading the other comments here. The US. system is seriously broken.

gills• 17 years ago

My wife is an engineer at a large corporation, I'm covered as a spouse.

...but that won't cut it if/when I get to the point of needing to hire other people.

utefan001• 17 years ago

I have a two year old that has 2 heart abnormalities. We thought she would need heart surgery, but the cardiologists don't feel this is necessary. The "leaks" in her heart are getting smaller each month. She looks like any healthy 2 year old. I have family members that are health insurance experts and they tell me I basically have to be a part of a group policy. The last 2 companies I have worked for have had minor increases to their 100+ employee group policy. The health company cited my daughter as one of the reasons for the increase. Luckily my coworkers don't know this.

Ask HN: What do founders do for health insurance?

Related Stories