Managing Family Healthcare While Self-Employed

November is National Diabetes Awareness Month.

---

The most significant mental hurdle before leaving my full-time career was health insurance. 

My former employer offered excellent healthcare benefits at an affordable cost. Leaving meant giving up the low-cost benefit but keeping the insurance through COBRA. 

Our 2023 health insurance plan is the same as when I was working, but I’ve paid multiples more. 

When I left my job in late 2022, COBRA was the easy choice and most agreeable with my wife. She worried about what we’d do for health insurance without my job. So we agreed we’d keep the same insurance as I transitioned to self-employment.

One less unknown. 

We’re a family of five. Our three kids are 11, 10, and 8 years old. 

My oldest has Type 1 Diabetes. His condition complicates our health situation and almost prevented me from becoming self-employed. 

We can stay with COBRA until June 2024 (18 months after the month I left my job). 

But the monthly expense hurts, and it looks like we can get more affordable care through the state healthcare marketplace starting in January. We’ll switch from a PPO to an HMO plan administered by the same insurer. 

There are still many unknowns.

Health Insurance for Self-Employed

Health issues can break the bank, making solid health insurance a required expense for a stable financial life.

Aspiring early retirees in the FIRE community think about it a lot. 

The rosy scenario is everyone is healthy, and healthcare feels like an annoying expense. That would have been us three years ago. 

Insurance pools funds from thousands of people and covers expenses for everyone. Many have minimal healthcare costs. 

But some people, like my son, are more expensive to keep healthy at no fault of their own.

In healthcare speak, he has a pre-existing condition.

Before the Affordable Care Act (ACA), my son’s diabetes would have precluded our family from reasonably-priced private health insurance.

Without the ACA, I’d be nearly forced to work for a large company. Self-employed health insurance would have been prohibitively expensive. 

The ACA gives our family options despite my son’s chronic condition.

COBRA coverage has served us well for 2023, but we’ll be transitioning to the next phase next year. Top of our concerns is finding the appropriate coverage. 

Those Damn Commercials (Type 1 vs. Type 2)

When you hear about diabetes in the news or on TV commercials, it’s usually referring to Type 2 Diabetes.

My son hates those TV commercials because they lump ‘diabetes’ into one category, and he has ‘diabetes’. 

90 to 95% of diabetes cases in the U.S. are Type 2. 

Type 2 Diabetes is a metabolic disease onset by age, sedentary lifestyle, and high body mass index (BMI).

The pancreas produces insulin, a hormone. Insulin unlocks our cells to use glucose(sugar) to give cells (and thus our entire bodies) energy.

With Type 2, the cells become resistant to insulin, raising blood glucose levels. 

The pancreas produces more insulin, and the cells become more resistant. High blood glucose levels cause a slew of long-term health problems.

Diet and exercise can sometimes make Type 2 diabetes go away, and prescription drugs advertised on TV can also help. Sometimes, people with Type 2 Diabetes need injected insulin. 

Type 1 Diabetes is an autoimmune disorder where the immune system attacks and permanently destroys the insulin-producing beta cells in the pancreas, disabling its ability to make insulin. 

Type 1 Diabetes doesn’t go away with diet and exercise, and there’s no new treatment to ask his doctor about. 

5% to 10% of diabetes cases in the U.S. are Type 1. Type 1 Diabetes is also called juvenile diabetes because diagnosis usually occurs during childhood, but it can also present in adults.

There’s no cure for Type 1 Diabetes, and the only medication to treat it is synthetic insulin. He needs an injected dose of insulin for every meal, most snacks, and a 24/7 insulin drip for the rest of his life.

Type 1 Diabetes and Health Insurance

Synthetic insulin is a medical miracle. It’s a life-sustaining drug. Without it, people with Type 1 Diabetes would die.

Manufactured insulin is 100 years old. But, drug companies have developed and patented improved types of insulin over the past few decades. Production requires sterilized facilities and precision.

So it’s a surprisingly expensive drug — and of course, the U.S. healthcare system is a playground for drug companies to fiddle with pricing, making it cheap for some (like us with good insurance) and expensive for others.

Three companies dominate insulin manufacturing for now. Generic alternatives are finally getting close to the market. 

What’s more expensive for my son is his continuous glucose monitoring (CGM) and insulin delivery devices. 

He wears a Dexcom G7 CGM device that tracks his blood glucose levels around the clock and an Omnipod Dash pump (pictured here) that delivers a small dose of insulin every 15 minutes and a measured dose for each meal that we calculate by counting how many carbohydrates he consumes.

The devices insert a small tube called a cannula under his skin and stay there for 10 days for the Dexcom and three days max for the Omnipod. 

It sucks. 

But, the devices make his life easier than enduring multiple finger pricks and daily injections.

The disposable devices are also expensive, and their categorization (“durable medical devices”) complicates coverage and access. 

They’re not crazy expensive. The real prices are hard to pin down.

Without insurance, the annual supply would cost us somewhere between $4,000 and $6,000 per year for each device type, out of pocket.

Our current insurance covers the costs after he reaches his low deductible (usually in January).

The next insurance should cover the devices as well. We expect to pay much lower insurance premiums but higher out-of-pocket costs when we order the devices (about every three months). 

I’m in the process of analyzing marketplace healthcare plans and will be calling the insurers to verify coverage. But how this ultimately works out will have to be learned on the fly. 

What’s Next?

The healthcare marketplaces opened enrollment on November 1st, and I’ve been browsing plans to fit our needs.

I have really liked our health insurance provider over the past six years. We’ve had zero issues despite a significant healthcare event (my son’s diagnosis and hospitalization) and chronic condition.

The excellent healthcare plan, I’ve assumed, stems from working for a premium employer.

The state healthcare exchange programs may be a different story. However, I’m optimistic about next year. 

Looking at the ACA plans on the Virginia state healthcare website, there are Gold plan options offered by our current provider with relatively low deductibles and premiums well below what I pay now. The out-of-pocket maximum is about $7,000 higher — that’s the most significant difference I see. Plus, there’s co-insurance after the deductible. 

Also promising, our family may qualify for subsidies, meaning we pay even less.

The government looks at income, number of dependents, and other factors when determining the ACA premium tax credit.

Estimating my income for next year will be challenging, and understanding how this all works with the tax credit will be a learning experience.

As a self-employed worker, business expenses reduce my taxable income, and health insurance premiums are considered a business expense. 

Regarding this, I recently learned that healthcare insurance premiums and business healthcare expenses have a circular relationship, meaning they impact each other. 

Therefore, I reduce my taxable income if I have a larger premium, and I’ll qualify for a lower monthly premium if I have a lower taxable income.

I put some faith in the fact that I pay closer attention to this stuff compared to most people. I’ll do my best to estimate future income, and the numbers should work themselves out around tax time in 2025.

It’s all quite confusing. But after almost a decade, I trust the tax preparer software and IRS to have the calculations figured out. I will go with the flow and only contact a CPA if something doesn’t look right. 

Regarding dental, I’ll be staying with my current insurer, who I’ve been happy with. We can buy a reasonably priced plan directly online and cover my family for about $125 a month. 

We’ve considered self-insuring our dental coverage, but I don’t have the appetite for the additional risk. We’ll reconsider next year. 

I should have a better sense of how this works out by June of 2024. I’ll write an update once it all settles. 

Featured photo via DepositPhotos used under license.