Between the Cracks

There’s one solid bit of advice a seasoned freelance writer offers to any self-employed person who wants to get good, cheap health insurance and other benefits:

Marry well.

Short of that, self-employed people could find themselves falling between the cracks of a benefits system that favors people working for large corporations.

“You just hope your wife keeps working,” said the writer, who asked not to be identified. “If we were both self-employed, I’m sure we’d just have catastrophic coverage. That’s what most of my freelance friends have. Or they have health plans just for the kids, and they go naked. It’s very Darwinesque.”

Nearly half--46%--of adults and children in California families headed by a self-employed worker are uninsured, according to E. Richard Brown, director of the UCLA Center for Health Policy Research.

That compares with 17% of adults and children in families headed by someone employed in a full-time, permanent job, Brown said. “It’s pretty desperate.”

Of the families headed by a self-employed person, 22% are covered by employer-paid insurance, usually from a spouse or other family member.

About 5% are covered by Medicaid and 3% have other public health insurance coverage.

That leaves 24% who are paying for private health insurance coverage, Brown said.

“When you look at the new ways people are working . . . they don’t fit under the framework, and they’re completely losing out,” said Sara Horowitz, executive director for Working Today, a national organization that advocates for the self-employed. “They don’t tend to have a solid employer because they’re working on projects or for a number of people. So there’s no one to contribute to a plan for them.”

For those who pay for private insurance, “generally the costs are higher and the benefits are not as good” as insurance obtained through an employer, UCLA’s Brown said. “There may be higher deductibles or larger co-payments when you want to go to the doctor, and those things reduce affordability.”

Jeffrey D. Simon, a former Rand Corp. researcher who is now a self-employed writer and consultant on terrorism, in Santa Monica, pays $178 a month for basic health insurance for himself through Blue Cross. It includes dental coverage, but has a relatively high deductible of $1,000 a year.

But he says he cannot afford to buy disability or long-term care insurance, and is forgoing other kinds of insurance and retirement savings for now.

“The main problem when you’re self-employed is that you take care of the most important thing, the health insurance,” he said. “As your business grows, then you can start taking care of all the other aspects. But when you’re building a company, you can’t really divert that many resources into the retirement and those other benefits.”

The new health care law signed in August by President Clinton improves things for the self-employed. It gradually raises the federal tax deduction for health insurance premiums from 30% of costs now to 80% by 2006.

And it allows self-employed people to set up tax-sheltered medical savings accounts linked to catastrophic health insurance policies, albeit with high deductibles. The accounts are part of a four-year pilot project, and a limited number of the policies will be issued.

How expensive can private health insurance be? Blue Cross of California, one of the largest insurers of private individuals, charges $40 to $183 a month for basic private health insurance, said Deborah Lachman, the firm’s general manager for individuals and small groups.

(At Blue Cross, self-employed people can also qualify for small-group insurance coverage at rates comparable with private insurance).

But anything above basic coverage quickly adds up. One of the company’s most popular policies is a preferred-provider option (PPO) that requires a $30 co-payment for office visits, with no deductible if the insured sees a doctor on an approved list. For maternity services, there is a $1,000 co-payment.

For a Los Angeles family with children, headed by a 35-year-old self-employed person, the monthly premium for such coverage would be about $343, Lachman said.

Comparable coverage, without the $1,000 maternity co-payment, would cost $390 a month through a small-group plan, Lachman said.

Despite the costs, Blue Cross individual coverage is popular: The company covers 835,000 individuals statewide, or roughly 26% of its total California membership.

Few of the self-employed can afford the kind of all-inclusive health coverage offered by health maintenance organizations, experts say.

“It tends to be much more expensive because it’s much more comprehensive than the type of high-deductible, high-co-pay coverage people generally buy individually,” said Donald White, a spokesman for the American Assn. of Health Plans, an HMO trade group in Washington.

But Marcia Yudkin, a Boston-based freelance writer, said she’s held individual memberships in one HMO or another since 1981. “It’s been no problems ever, and the cost is reasonable,” she said.

“When I moved out of range of one HMO, I inquired and found out they had reciprocal membership arrangements, so there was no problem,” she added. “I also managed to get disability insurance this year as an individual. That was a bit more of a hassle because those companies have a hard time understanding what a disability for someone who works at home would look like.”

Yudkin pays just $159 a month for her HMO coverage through the Havard Community Health Plan.

There are alternatives to private insurance.

The National Writers Union, a New-York based labor union affiliated with the United Auto Workers, offers a variety of benefits to freelance writers who become members.

Monthly premiums of $164 to $255 will buy health, dental, vision and life insurance. Starting next year, writers in the union will be able to purchase additional benefits, including disability and liability insurance against libel.

The premiums are in addition to annual dues of $80 to $180.

For self-employed people who don’t want to join a union, organizations like Working Today can provide a benefits package. For dues of $10 a year, Working Today offers prepaid legal services and health insurance at premiums of roughly $170 to $225 a month for basic coverage.

Other associations and trade groups offer a variety of benefits, Horowitz said.

“I would recommend . . . going to any reference library and getting . . . an encyclopedia of associations, finding organizations that most closely fit them, and find out about them,” she said. “They’re all over the place.”

As an example, the American Institute of Certified Public Accountants, a New York trade association, offers a program of life, disability and long-term care insurance to its members.

Not everyone likes the group plans, however.

“I suffered through the National Writers Union’s health insurance woes for four years,” said Colorado-based freelance writer Catherine Dold. It was “constant last-minute changes of carriers with sky-high increases in rates. By the time I left New York City last year, my insurance with them was up to $270 a month I think. I’ve now got a private insurance deal with a PPO here in Colorado for just $70 a month, and it’s a much better policy.”

Sheila Velazquez, a Tennessee-based freelance writer, had a novel approach to insurance coverage.

After paying $2,500 a year for private health insurance, she discovered that students at the University of Tennessee can purchase major medical health coverage for $299 a year.

Tuition for state residents, meanwhile, was $1,100 per semester. “So, for the cost of my insurance premium, I could, in effect, attend school and be covered,” she said.