Finding Insurance When You Quit Your Job

how to find health insurance
I frequently write about chasing your wildest dreams: quitting your job, traveling the world, launching a business. (I’ve done all three). But no matter which of these topics I’m discussing, I hear the same question:

“So what do you do about health insurance?”

Yikes. I hear this question constantly. Health costs are the monster on everyone’s mind.

Which makes sense. Normally a person gets health coverage through their boss. How do you insure yourself if you lead an unconventional life?

Step 1: How Much Can You Spend?

Once upon a time, I thought health insurance was supposed to pay every penny related to health care.

A few years ago, I figured this out: Health insurance isn’t necessarily supposed to pay for your flu shots and teeth cleanings. It’s supposed to save you from a financial catastrophe related to illness or injury.

Do you follow?

The insurance companies aren’t saying, “Pay me $X and you’ll never spend a dime on a flu shot again.” They’re saying, “Pay me $X and I’ll protect you from bankruptcy if you break your arm.”

This mental shift makes a huge difference.

Rather than hunting for a plan that spares me from all health spending, I found plans that fits what I can pay without becoming stressed by the payments.

Of course, one man’s “financial catastrophe” is another man’s “That’s not so bad.” Some people draw the line at paying $1,500 a year. Others draw the line at $15,000.

Step 2: Shop Around.

I use eHealthInsurance to compare prices. This site lists plans from a huge range of providers. You can set your search criteria based on the premium (I wanted a monthly payment less than $125), the deductible (I wanted a deductible less than $6,500), and the yearly out-of-pocket maximum. You can also search based on the insurer’s ranking and popularity.

Long before I ever boot up my computer, I ask myself: “If I got hit by a bus, how much could I pay?”

Voila – that’s my “ideal” deductible.

I found a plan for $82/month with a $3,500 deductible and a $5,500 out-of-pocket maximum. Not bad, eh?!

Step 3: Follow Through

Here’s what happens too often: A young, healthy person gets a policy with a high deductible and low monthly payments. They reason, “Well, I’m healthy, so this is worst-case-scenario insurance. I’ll pay for small stuff out-of-pocket.”

Something minor happens: a rash, a violent stomach ache. Any normal person would head to the doctor. But the healthy person with the high deductible says, “I’ll just stay home and look this up on WebMD.”

Then they spend $65 on their cable TV bill.

This is penny-wise and pound-foolish. If you buy a policy that requires you to pay for small expenses out-of-pocket, follow through.

Step 4: Be Fearless.

The greatest hurdle is psychological. While I was at my cushy newspaper job, I felt assured knowing I had … something adequate. Maybe. I hope.

You see, I never paid attention to the details of my employer-provided health insurance plan. I assumed – as many people do – that if my insurance is through my company, it must be good. My pseudo-logic went like this: My employer is stable. Therefore, his health insurance must also be stable.

Psychologists call this the “association fallacy.” I call it “not reading the fine print.”

Fortunately I never got sick, so I never put this assumption to the test. But in hindsight, I’m struck by how many years I spent making a massive – and potentially costly – assumption.

In that regard, you’re fortunate that you get to CHOOSE your own health insurance.

The Bottom Line: Health insurance is a big-ticket item, so shop around. Your time is limited. Don’t waste it pinching pennies.

Find an insurance plan that can save you $100 a month. This is a better use of your day than saving 10 cents at the grocery store. Compare prices through eHealthInsurance
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Photo courtesy Army Medicine.

A Tree Fell on Our House Last Night

The rain was picking up and the wind had kicked into a low, steady howl when my boyfriend came home with the bad news.

“Our homeowner’s insurance kicked us off their policy five days ago,” he said, “and didn’t even notify us.”

I looked up from the book I was reading and raised one eyebrow. At least, I tried to raise one eyebrow. I keep trying to imitate that incredulous, one-eyebrow-raised look, so perfectly done in movies. But both of my eyebrows shoot up, every time.

“They cancelled our coverage?” I asked. “How? Why?” Thunder boomed. It was louder than it had been a few minutes ago. The storm was coming closer.

“After covering our home for six months, they did a periodic review and decided we were a ‘commercial’ property rather than ‘residential’,” he said. “So they dropped us five days ago.”

We own a triplex — a three-unit building, filled with tenants. Perhaps that’s why they consider us ‘commercial.’

We plan on moving into the largest unit this fall, when the current tenant’s lease expires. Until then, we’re renting an apartment across the street.

“What’s annoying is that they didn’t notify me,” he continued. “If I hadn’t happened to call the insurance company today, I never would have known.”

“Why did you call?” I asked. Outside, the wind was howling louder. Rain, which minutes ago had been coming down as a normal spring shower, started pounding the pavement more fiercely.

“I wanted to ask about their auto insurance,” he said. “I wanted to see if I could get a cheaper plan through them. So I called my agent, and he had no idea our homeowner’s policy was cancelled, either. He pulled our file and then became really flustered. Said he’d have to talk to his supervisor and call me back.”

“When he called back,” my boyfriend continued, “he said they already cancelled our policy. Our agent seemed mad that they didn’t bother telling anyone — not even him, whose job is to know.”

“Hmmm.” I wasn’t too concerned. We’d just buy different coverage tomorrow. “Did we miss a payment?”

“No, we were on auto-pay. They withdrew money directly from our checking account every month. But here’s what’s interesting: they didn’t withdraw anything last month.”

“So they just — stopped taking our money? But they never notified us of the cancellation?”

“Yep.” Hail began pounding the siding. The cat scurried underneath the couch. Her pupils dilated as big as her eyes.

“Isn’t that like the movie Office Space — instead of quitting his job, the guy just stops coming to work? Isn’t that what the insurance company did to us — instead of notifying us that they cancelled our policy, they just stopped withdrawing from our account?”

“Yeah, it’s pretty lame,” my boyfriend agreed. The lights in the room flickered for a second. “I should file a complaint with the Georgia insurance commission.”

The lights flickered again, and he suddenly looked concerned.

“Paula? Unplug your computer,” he said quietly. The hail was pummeling the windows like kids throwing rocks.

I moved from the couch, walked to my room and unplugged my computer at precisely the moment the lights in my room blew out. A blinding flash of lighting next to the window illuminated the room.

My phone beeped with a text-message from my roommate: “Pulled over on the shoulder of 10th St. All traffic lights out.”

I wondered about our triplex across the street. It’s a 101-year-old Victorian home in the heart of downtown Atlanta, surrounded by century-old trees in a tight cluster of super-urban density. Springtime Georgia storms are always wrecking havoc in this neighborhood. Just a few weeks ago, a tree fell on a power line one block away, triggering a small fire and causing a 12-hour power outage. A week before that, a neighbor’s parked car was crushed by a falling tree.

My eyes had adjusted to the electricity being down. One small red emergency light kept our hallway illuminated. I could see the outdoors by the glow of the early-evening haze. I stood in my room, with all the lights down, watching the rain pound the parking lot behind my apartment.

Then Everything went Dark.

Suddenly everything went dark. Even darker than when the power failed, minutes ago.

“What’s going on?” I thought, and then I realized — a tree had just fallen onto our next-door neighbor’s house. The foliage from the branches pressed thick against my window.

“Honey?” I called out. “A tree just fell onto the neighbor’s house!”

“I see that,” he said. He was standing in the living room, staring out the window, which wasn’t obstructed by leaves. “It’s really messed up their roof. See that? Hope it’s not raining inside their house right now.”

We waited out the storm another half an hour until the rain finally started to subside and the flashes of lighting grew dim. I heaved a sigh of relief. No frantic calls from the tenants at our triplex across the street. We had made it. We were in the clear.

“Let’s go to dinner,” I said to my boyfriend.

It was at dinner that we got the text message:

“Kinda big tree fell in backyard. Didnt break anything but its blocking the apt. stairs and walkway.”

And a few minutes later, my phone buzzed again:

“Someone may have mentioned it already, but a large limb came down in the backyard during the storm … blocking the exit to my apt. Who removes those?”

Oh sh*t. As the French say, “merde.”

I looked at my boyfriend. He didn’t know what was happening, but he guessed it was bad from the look on my face. His face mirrored back a panic-stricken expression.

“Um, babe? We gotta go to our house. Now.”

The tree had crashed just inches from the outdoor stairwell …

The small branches and leaves were blocking access to the stairwell, barricading one of our tenants inside. But the heavy limb — the part of the tree that could actually split the stairwell in half — had missed the stairwell by inches. The heft had fallen onto the driveway.

Another tenant’s motorcycle was parked at the opposite end of the driveway. The heavy limb had missed it by inches.

Miraculously, there was no damage. The house was fine. The roof was fine. The stairwell was fine. It was as if God Himself had said, “How can I make this tree limb fall at exactly the perfect angle such that nothing gets hurt?”

And then God added, “Just for fun — or maybe to teach them a lesson about the importance of homeowner’s insurance — I’m going to make it happen just hours — HOURS!! — after they discover they don’t have coverage. But don’t worry, kids — I’ll spare your house from damage.”

Whew! What. A. Close. Call.

We spent the rest of the night chopping off branches with a sawzall, clearing the stairwell so our tenant could go to work in the morning. Today I’m heading to Home Depot to buy a chainsaw (yep, little 5’1″ South Asian girl wielding a chainsaw), while my boyfriend is going to sign up with whatever company will give him homeowner’s insurance — NOW.

“I’m getting insured with whoever will do it the fastest,” he told me. “Price be damned.”

And just to make sure we’re notified the next time our coverage is dropped, he’s mailing a $3,000 check to pay upfront for the next 12 months.

“If they drop us, they have to refund the unused portion,” he reasons, “and then we’ll actually KNOW that they’ve dropped us.”

Meanwhile, as I write this, a crew of about five guys are outside my apartment window, chopping down the tree that crashed into our neighbor’s house. I can hear them arguing about the best way to cut down the tree without further damaging the home or the fence by the limbs hitting the ground. We’re going to have that same argument later tonight, when my boyfriend gets off work and it’s our turn to chop down the heavy tree limb across the street.

The cat hasn’t left her hiding spot under the couch. Between last night’s hailstorm and today’s chainsaws, she thinks she’s in Armageddon.

One Type of Health Insurance to Avoid

Many people assume that if some health insurance is good, more health insurance is better. That’s not always true.

Sometimes, having a little LESS coverage is the smarter move.

Don't let sticker-shock fool you: high monthly premiums, over time, can be worse.

To understand why, keep in mind that the purpose of health insurance is to safeguard you against risk. The purpose is NOT to pay your medical bills, it’s to keep you out of bankruptcy.

Health insurance should be used ONLY as a safeguard against calamity. It should never be used as a way to cover reachable costs.

It’s Not “Health” Insurance, It’s Bankruptcy Protection

“Health” insurance is a misnomer. Don’t think of this as insurace that covers the cost of your healthcare — think of this as insurance that protects you from going bankrupt.

Example: Suzy thinks that health insurance should pay for all of her health-care bills. She’s 28 and in good health. She pays $350 per month for individual coverage, which allows her a $500 deductible and pays 100 percent of her health-care expenses after the deductible.

Total cost per year = $4,200 + $500 deductible = $4,700 per year out-of-pocket, every year.

John thinks that health insurance is protection from bankruptcy. He doesn’t expect it to cover the health-related bills he can afford out-of-pocket, like eyeglasses, an annual physical, prescription allergy medication, and a yearly dental exam. He’s also 28 and in good health, and he pays $105 per month for individual coverage, which allows him a $1,500 deductible and covers 80 percent of his health-care costs after the deductible until he reaches his out-of-pocket maximum of $5,000, at which point it covers 100 percent of costs.

John understands that this means that, in any given year, the most he’ll have to pay is $1,500 (the deductible) + $5,000 (the out-of-pocket maximum) + $1,260 (his premium). This means that if the worse-case scenario unfolds, he’ll have to cough up a maximum of $7,760. This is the worst-case scenario.

But most years, while he’s healthy, he pays only $1,260 (his premium) + $700 of his deductible, which he uses for an eye exam ($150), new eyeglasses ($100), allergy medication ($150), and miscellaneous other costs ($300). This means that most years, John pays $1,960.

Who Saves More?

Suzy pays $4,700 per year, while John pays $1,960 per year. Both are protected against the worst-case scenarios: if they break a bone, need emergency surgery, or get diagnosed with a disease, their expenses will be covered.

John knows he needs some padding in his bank account to cover any extra out-of-pocket expenses, so each month he stashes away the difference between Suzy’s monthly premium ($350) and his own monthly premium ($105). This means each month, he saves $245, which he can tap whenever the worst-case scenario unfolds.

John saves this $245 per month in an Health Savings Account, a tax-deferred account that is only available to people with high-deductible insurance plans like his. The $245 he saves each month is tax-free income, and as long as he spends it on medical expenses, he’ll never pay a penny in taxes on that money. Since he normally pays 28% in taxes, this means each month he gets $69 in “free money” (money he’d otherwise have to pay the tax man).

Suzy, meanwhile, is paying her after-tax money as a monthly premium.

Both John and Suzy Break Their Leg.

Two years into their health-care plans, both John and Suzy break their leg. Cost: $10,000. Suzy pays her normal yearly rate: $4,200 premium plus $500 deductible. She doesn’t see any difference in her bills; she paid the same amount last year, when she had no major medical expenses.

John is faced with a total bill of $3,200 for the broken leg. He has been saving $245 per month in a tax-free Health Savings Account for the last two years, so he has $5,880 in the bank. He uses the balance in his Health Savings Account to pay in full.

Add the $3,200 bill to his $1,260 normal premium, and he’s spent a total of $4,460 that year.

How Much Did They Each Pay?

Over the span of two years and one broken leg, Suzy paid a total of $8,400 while John paid $6,420.** Suzy paid after-tax money while John paid mostly tax-free money from his HSA.

In that same span of time, Suzy has $0 saved, while John has several thousand in the bank.

**(John’s payments = $1,960 from Year 1 and $4,460 from Year 2.)

What Should I Do?

Don’t assume – as most people do – that more is better. If you’re in good health, sometimes less health insurance is better, as long as you can pay for costs once they skyrocket.

Afford Anything’s Golden Rule of Buying Insurance is to never pay insurance for something you can cover out-of-pocket. It may stink to have to pay such a big bill out-of-pocket; there’s a large sticker-shock at receiving a $6,500 hospital bill, or shelling out $1,500 for an out-of-warranty refrigerator. But paying high premiums for high coverage does not make sense for most people. (Add up those premiums over 2-3 years, and you’ll get an even worse sticker shock.)

If you’re in poor health or elderly, and you’re likely to run up high medical bills every year, it might make sense to get the higher coverage. But if you’re healthy, then stick to the Insurance Golden Rule.

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Want to compare health insurance quotes? This website lets you compare policies with different premiums, deductibles and out-of-pocket maximums. Check it out and apply for the cheapest-and-best coverage you can afford!

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