Question about maternity coverage

[amishp11]

What is the name of your state? IL

My wife and I are self-employed now. She used to be a teacher and had great health coverage through the district.

If we elect cobra it is about $460 a month just for her; again it is great coverage. I pay about $160 through Blue Cross Blue Shield for individual coverage myself.

We've tried looking for outside coverage for her (or both of us) that has good maternity coverage as we were planning to have kids next year.

However, BCBS requires a 1 year waiting period for all maternity coverage. Meaning we pay the full monthly premium that includes the maternity coverage but the maternity coverage doesn't start for 1 full calendar year. Other companies either have similar waiting periods or limited coverage the first year (e.g. up to 2500).

She is on her first month of COBRA and she has 17 months to go so I guess we're okay for now. But what can we do so that in 17 months she'll still have maternity coverage?

Thanks,
Amish

[cbg]

You might investigate whether or not having you on the coverage for a year, and then transfering her to the policy when her COBRA runs out, will satisfy the condition.

As you are self-employed, are you the only employees or do you have staff working for you? I have another suggestion but it will not work in all situations or all states.

[TIMMAAYY]

Save the money and negotiate with the hospital.

Your indiviudal plan will cover complications, but not the actual birth of the child.

The money you would spend on coverage for that length of time is well exceed the actual benefit you would get in coverage.

You are self-employed? Does your spouse help you with ANY thing work related? If so, you can hire her and pay her in benefits ONLY, and have a two person group plan. That being the case, all small group cases are guaranteed issue, meaning they have to take you, and they can't pre X you for maternity.... ever.

You should also have a 105 document in place so that you can write off all medical related expenses as a BUSINESS expense.

Being self employeed, you have a few options, but for handling maternity and you have the ability to have small group insurance, I'd definitely go that route. Here's how it would work. Once you are pregant, get group insurance with maternity coverage. It doesn't matter how long you wait to get the coverage, you can do it the month before the baby is due, and they have to accept you. What they CAN do, is rate you up fully ( the term is max-loaded). The good news is, you can drop the coverage after the baby is born and go back on individual if everyone is still healthy. If you become pregnant again, sign up for a group of 2, rinse, repeat.

A 105 document, as I mentioned earlier, is simply a tax strategy that allows a business owner to claim all medically quailified expenses as a business expense. It's a FEDERAL law, meaning it works in every state. You would need the proper documentation to set it up, but once it's set up, it's yours as long as you want it.

[ecmst12]

Of course, it might be cheaper or the same cost to stay on the group plan. And constantly switching insurance plans is a pain in the neck. And if you want the plan to cover your prenatal care, you don't want to wait until the day before you deliver to sign up for it. They can't consider pregnancy pre-existing, but they still don't have to cover any charges incurred prior to the effective date. I also think your suggestion is dishonest, even though it might be legal, I still think it's shady.

Why would they need to write off medical expenses as a business expense? Medical expenses are already tax-deductible.

[TIMMAAYY]

There are more things allowable to write off with a Section 105 plan. Typically, most people write them off the personal expenses, and can only write off the amount over and above the ceiling ( $7500? something like that? ) . As a business expense, you can deduct them right off of schedule C directly. No "above and beyond" limit to hit first. With the list provided by the IRS ( 502b and Section 213d ) you can write off any of the allowable expenses listed there, even mileage to and from the doctors office.

As far as being shady.... no. It's their rules. Use them to your advantage. They'd do it to you in a heartbeat. Nothing shady about it... it's just knowing the rules and playing the game.

Think of insurance as legalized gambling. The insurance company is the house, and you are "betting" on how much of a risk you want to take. Most of the time, the rules are stacked against you... you won't win, you will just "lose less". If their rules help you, by all means, take advantage of it.

How exactly is that being "shady"? It's their rules, not mine. Small group. Guarantee issue. Can't pre x pregnancy. What better option is there?

[cbg]

That was exactly why I asked about staffing; to see if a group plan might apply. My state allows for one life groups and I think a few others do, but I don't know about the poster's state. The only thing I would question is hiring the wife for benefits only - that would violate wage and hour laws. If she's an employee, she MUST be paid. (But payment could be at minimum wage.) If she's not an employee, then the plan document would have to be very carefully written to allow her coverage but exclude anyone else. I'm not sure it could be done.

I don't see anything shady about the overall concept.

[cbg]

I realized after I hit submit that it was barely possible, if the business is small enough and if it does NO interstate commerce whatsoever (that means not so much as a phone call is made or a pencil is bought out of state) that it might not be subject to wage and hour laws. In which case there would be no issue with hiring the wife for benefits only.

But even though it's possible, it's a long shot.

[ecmst12]

From the original post ("My wife and I are self employed") it sounds to me like the wife is a partner in the business.

Affordable group coverage may also be available through a local small business owners association, if there is one in your area.

[TIMMAAYY]

I'm not a big fan of the "Chamber Plans". They really don't do anything for you. They TELL you that you get a discount.... but I have a hard time believing that from some of the plans and rates I've seen. You can also be limited to only the plan offered through the chamber. I think it's akin to the old car dealer bit where they tell you you are getting a good deal, so it must be true. It's not like insurance plans have a "sticker price" that you can check on and find out. I've even had one client in the past that applied for the "chamber plan", because they wanted the 3% discount. Then the broker they had said they didn't qualify, but couldn't tell them why. Turns out he was full of crap, and so was the chamber plan bit. When it was all said and done, we were able to save them well over 27% from their OLD rates, and they had a better plan.

Back to the hiring of the spouse, you are correct in that it must be written into the 105 document. You CAN pay only benefits. Since she is the only employee, you don't have to worry about other employees only being offered benefits versus a wage. In return for her services, she is paid in health benefits.

The 105 documentation can cover a lot of things, but it must all be written into it, and carefully worded. Most of my clients don't do a simple 105 plan, they do a full blown Limited Medical Expense Reimbursement Plan. It can include lots of different options.

[ecmst12]

My mom works for a small business and gets her coverage that way at a reasonable cost. I think her boss does pay for it. It's definitely a lot cheaper, and easier, then trying to get a group plan for a group of 2 (she's the only full time employee of the store).

[TIMMAAYY]

Gets it what way? Through a chamber or organization? Or a group of 2? Only one carrier that I know of will allow a group of 1 ( Medical Mutual ) and they only do it on new business. If you failed to meet the criteria as an existing group and tried to do a group of one, you'd probably have to go through the whole new application process again.

It's really easy to get a group of two. Just fill out the apps, pick a plan, get the quote, submit the check with the signed quote, bingo. Coverage.

As far as ease of paperwork, small group is easy, especially when compared to individual. Less questions, pretty quick turn around time on submitting apps and getting coverage, less mess. But .... you end up paying quite a bit for that "convenience".

In the particular case of covering maternity, using the small group rules are the way to go IF you have access to them and meet the criteria ( spouse employed by other spouse, no other full time employees ).

[ecmst12]

She told me it was through a small business owner's association. I don't know the details since it's not my coverage But the town that the store is in has a lot of small, independently owned restaurants/stores/etc and I guess they got together to form a larger group.

I have looked at what my dad was paying a couple of years ago to insure himself, his wife, and my sister that's still a minor, plus his one employee...talk about YIKES! But affording it wasn't an issue for him

[TIMMAAYY]

When you are looking at getting individual insurance, don't try to "match" all the things offered through group insurance. You don't need it. If you are able to quailfy for an individual policy, get as high of a deductible as you can, and HSA is even better.

Why?

If you were to go on their website for quoting.... we'll use Anthem as an example... look at all the options they have for individual plans. Sure, you can get that $250 deductible, 80/20 to $500 out of pocket plan with copays in it for office visits, specialist visits, even load up on the pharmacy card and the dental option while your at it. But do you know what it's going to cost you EVERY month just to have it? It's ridiculous! Why do you want to buy all that crap up front, that you won't use? Remember what I said about insurance and gambling? Here's another correlation. The sooner the house is on the hook for your bad bet, the more you are going to pay to play, and they don't like to lose. 90% of the stuff in group plans isn't used by 90% of those who have them. Allergy shot copays, well child care, office visit copays, low deductibles, MATERNITY... did you realize that on a group plan that offers maternity.... even the single males and those who are never going to have kids are paying for maternity coverage? Likewise, females are covered for prostate exams. This is a good way to hose yourself and your checking account if you don't know how to buy insurance.

The key is to look at everything on an annual basis. That monthly premium is going to be there regardless of whether or not you even use the coverage. And all those office visit copays and pharmacy copays? None of them apply to your deductible. So if it costs you $500 a month fo an individual plan with a $500 worst case out of pocket, AND you sitll get to pay the copays ( because you bought it that way ) after you "max out"... your BEST case is $6,000 a year. Your worst case is $6,500 plus any additional copays.

OR

You could get a high deductible plan like I have... $2,500 deductible and out of pocket max ( no coinsurance, all deductible up front ). It costs me about $80 a month. My BEST case is $960 a year. My WORST case is $3,460 a year.... better than the BEST case above by a long shot. And once I max out for the year, I'm covered 100% for everything covered in my plan. No more out of pocket. Even pharmacy. Not a bad deal, eh?

Buy smart. Don't buy all the prepaid crap from the carriers. It's a huge ripoff.

[amishp11]

Sorry, I've been out town meeting with a client.

So in response to some questions. My wife is a 51% owner in the "business" as we wanted to take advantage of any "minority, woman owned" perks as possible.

I'll call around and ask for a small business group policy and see what they say.

And the last post makes numerical sense. I'll have to look into that.

[Forgetful drive]

I do not know the specific laws in your state, but in ohio, a group policy cannot be purchased by a group formed for the sole purpose or primary purpose of purchasing a group policy. I.E. the group must exist for some reason other than insurance, and the purchasing of health insurance must be secondary to that.

In order to cover all your bases I suggest paying your wife minumum wage as suggested above.