Losing Your Employer-Sponsored Health Insurance

Lessons for the Newly Self-Employed #3

When you leave your job and start your own business, one of the major consequences is losing your employer-sponsored health insurance. You may be able to continue your coverage but you’ll have to pay premiums out of your own pocket.

I discovered the other day I was no longer covered by my employer-sponsored plan when a claim was rejected and returned to me.

When I went on long-term leave from my job with the Canadian government in May 2010, I was under the impression my health coverage would continue for three months until August 2010, with the option of continuing coverage by paying a monthly $100 premium. I thought I had done my homework by reading a lengthy policy document on the government’s website.

There are often several, contradicting versions of the same document in the Canadian government. The version they’re enforcing this week states that coverage ends on the last day of the month that I stop working there, unless I make arrangements in writing beforehand. Since June 1, I haven’t had coverage.

This was a shock for me even though mentally I knew I’d eventually have to provide for my own health coverage. It’s happening at a time when I’m still feeling like a new hand at my business. I’ve only recently adjusted to the fact that I no longer receive a regular direct-deposit paycheck.

Income-wise, things are going better than I expected, but still fragile. I’ve fluctuated between 4-6 readings a week over the last month, which is enough to pay many basic living expenses, but I’m still drawing on savings to completely support my lifestyle.

For the first time in my life, I’m lacking insurance coverage and I’m feeling kind of naked.

I don’t yet have a full picture of the implications of not being covered for health or disability insurance. In Canada, everyone gets free basic catastrophic coverage provided by the government, but many things aren’t covered, such as prescription drugs, dental, optical, and holistic/preventative medicine.

I estimate that my total health bill for everything not covered would amount to somewhere between $1,000 and $1,500 a year, and my feeling is that buying insurance for most of these expenses isn’t worth it. But it’s harder to assess the value of other insurance benefits I had with my job, such as disability insurance and hospital room upgrades.

Many of my self-employed friends choose to pay most expenses out of pocket, while retaining coverage for catastrophic expenses. This is probably the route I’ll take, but familiarizing myself with the various options will take time and consideration. I’ve been using a number of expensive prescription drugs for asthma and acne, and I have a couple of on-going high-cost dental procedures that are currently paused. All these would make a visible dent in my finances.

I’m feeling uncomfortable with this situation – after receiving notice of my rejected claim, I stayed awake in bed for a long time thinking, calculating and feeling depressed. A lot of worries and anxieties were stirred up, creating a tropical storm of emotions.

Now, more than ever before, I can appreciate the peace of mind that a regular paycheck and health benefits can provide. There are advantages to having a job.

But for me they don’t outweigh the frustration, dread and the sinking sensation I felt everyday as I walked to work. I felt like I was wasting my life doing a job that didn’t matter to me or the people I care most about. If I stayed in my job I’d be paying a tremendous price for security. I’d feel way too disconnected from my passion and who I am, and I’d be embarrassed to tell people I had a job working for the government.

My gut tells me not to be discouraged with the situation I’m in. Business has shown some encouraging signs of growth. But if I fail, I feel confident in my ability to deal with the fall-out. I’ve been nearly bankrupt once before, and I’m in much better financial shape now.

The bottom line is that I’m not prepared to give away a significant chunk of my power to a regular paycheck and health insurance benefits.

If you’re thinking about quitting your job to start your own business, you might run into a similar situation of limbo – losing your sense of security, worrying about finances, and facing an uncertain future as you learn the ropes of being self-employed. Your future is in your own hands, and you truly have to stand on your own two feet and fend for yourself.

As a self-employed person, your journey is one of discovering yourself, expressing your passion and taking responsibility for your life. It comes with its ups and downs. One week you’ll celebrate major successes – the following week, reality hits and brings you back down.

Still, I can’t conceive of many other arrangements that would provide me as much room for creativity, as much passion and drive, or as much satisfaction and pride at the end of the day. This path is by no means easy-going, but boy, do I ever feel alive

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