Health Insurance for Streamers
Well folks, this is US only because we’re one of those weird countries that leaves health care up to the individual. If you’re from outside of the US feel free to skip this health insurance article.
Regardless of where you fall on the debate around how health insurance should be provided you should get health insurance. Why? If you read through our article on analyzing risk you will know that you should insure risks that are infrequent and catastrophic. Health issues are (hopefully) infrequent and are often catastrophic so they fit right in that bucket. Additionally, the American healthcare system is built around people having insurance. Unless you’re remarkably healthy, well-off, and lucky you won’t be able to bear the cost of healthcare without insurance.
How does health insurance work?
Insurance Basics
All insurance works by pooling risk. Actuaries are experts who analyze population level data to put together risk models that are irrelevant to the individual but are highly relevant to the entire population. Think of how we know smoking is terrible on a population level but there are always those individuals who smoked their entire life and lived a long, health life as well as some who never touched it and still die of lung cancer. You can’t know ahead of time which of those two you are so the smart decision is to pay someone to take the risk for you. With enough participants, the company can know that on an entire population level they’ll experience a certain amount of risk. That allows them to price their products appropriately so they can run the business and make some profit.
Current State
US health insurance is often provided through employers which is a relic of WWII employment policies. The employer, since they’re buying a plan for all of their employees, can get a better rate and subsidize most of the cost to you. Previously this was the only way to get health insurance if you had a pre-existing condition meaning you were already sick. Since the passage of the Affordable Care Act (commonly called Obamacare) insurance companies can’t exclude people for pre-existing conditions. Being able to exclude someone for pre-existing conditions would be like being able to exclude opponents in Starcraft just because they were ranked higher than you… kind of not fair. Additionally, insurance companies used to be able to put an annual or lifetime cap on your benefits, meaning if you got really sick you might run out of coverage. That’s no longer the case.
Pricing
Like all insurances, health insurance is priced based on your risk factors. For your health your primary risk factors are age, behavior (Do you smoke? Are you sedentary?), some basic health statistics (weight and BMI, family history of certain diseases, medical history), occupation (do you make your money defusing sea mines?), and sex.
Additionally, you determine price by the type of plan you select and the different options that go in to that plan. Regardless, health insurance is expensive. What does it mean when insurance is expensive? It means the thing you’re insuring is either expensive or common. In this case, health issues are both relatively common and expensive.
The average cost of health insurance for an individual in the United States is nearly $400/mo. You could get an income based tax credit to reduce the cost if you qualify and generally being younger and healthier reduces your cost. I like this calculator from the Kaiser Family Foundation for seeing if you qualify. If you’re making less than 400% of the relevant poverty line in the US you can get help. That means if you’re earning less than about $47,000 as a single tax filer you can get a benefit!
How do you get it when you’re self-employed?
Health insurance is one of the big hurdles for people moving to self-employment since you haven’t really had to deal with it while employed. Fortunately, states now either have to have their own health insurance marketplaces or use the federal government’s marketplace. You can find more info for your state at Healthcare.gov.
While many insurers offer plans on the healthcare exchanges you can also go directly to their sites to find different plans. Sometimes the ones generally available for you don’t work because of limited provider selection or you need something specific they don’t offer. Other times you just need a differently priced option. Either way, it’s a good idea to talk to the healthcare providers you use and like to see what insurers they work with.
What are some things to look for in a policy?
Deductible, coinsurance, and copays
Your deductible is the amount of money you’re responsible for out of pocket before the insurance kicks in. If you have a policy with a $5,000 deductible then you’re on the hook for that first $5,000 of cost. The higher your deductible the lower your monthly insurance cost. That just makes sense because you’d have to have a worse health event for the coverage to kick in. Therefore, you’re reducing the odds the insurer has to pay. You should keep your health insurance deductible in mind when deciding on how much to put in your emergency fund. A higher deductible means a bigger emergency fund.
Coinsurance is the percentage of cost you pay once your insurance kicks in. A higher coinsurance reduces your monthly premium because you’ll pay more in case of a medical emergency. Here’s an example: if you had a medical issue that cost $10,000, had a $5,000 deductible, and a 20% copay you would pay $6,000 in total. First, you pay the $5,000 up to the deductible limit. After that you pay 20% of the rest of the cost ($1,000 here). That means the insurer only pays $4,000! If the medical issue cost a total of $20,000 then you’d pay $8,000 and the insurer would pay $12,000. Your total payments in a year can and should be capped. Above that cap, the insurance company pays 100% of the cost.
A copay is a flat amount you pay on each visit. Often, you’ll see basic visits have something like a $20 copay. They’re basically there just to make sure you don’t totally abuse access to services but they won’t be a big cost if you’re going for your routine care.
Overall, raising your deductible, coinsurance, or copay should reduce your monthly premium cost. It’s up to you to decide which is more important to you.
Type of coverage (HMO, PPO)
There are two main types of insurance plans: Health Maintenance Organizations (HMO) and Preferred Provider Organization (PPO).
In an HMO you get access to providers at a reduced rate. However, you only get access to those providers. If you go out of network for some reason you get no coverage, which can really suck. HMOs also generally require you to have a designated primary care provider (PCP) who is responsible for ditating most of your care. This means if you want to go to a specialist you need a referral from your PCP. The restrictions on these plans makes them less expensive than PPOs.
In a PPO you have a similar network of preferred providers but you’ll still have some coverage if you go out of network. These plans tend to cost more because of greater flexibility.
Overall, you need to decide how important the location of your service and your specific provider are to you. If you really like your doctor or there’s only one good hospital near you then you may want to spend a little more to get access to them.
Cost
I mean duh, right? One of the things you should consider when selecting your insurance is cost. Your plan could cost wildly different amounts depending on the different options you select. Make sure that you’re not breaking the bank. Maybe if you have a long history of illness you won’t have a choice besides the most expensive option but in general if you’re young and health you can pick. Is it more important to pay less monthly and more in the case of an emergency or is it more important to know that you’re covered?
Company reputation
How do customers rank the company? Does it pay claims quickly? Are they easy to get on the phone? The last thing you want to experience is trouble with your insurer as you’re going through a medical emergency.
Taxes/benefits
Luckily, there are some benefits you get for having to pay for you own insurance. They probably don’t equal the cost of the insurance but it’s better than nothing!
The health savings account (HSA)
The HSA is one of the best tax benefits the government has created. If you have a high deductible health plan (HDHP) you can open an HSA. A high deductible is more than $1,300 for one person or $2,600 for a family. The cool thing about the HSA is it’s the only place where you can get a triple tax break. The money you put in is pre-tax and you can invest it like you would a 401(k) or IRA. The growth isn’t taxed and if you use the money for healthcare expenses, are over 65, or are disabled you can take it out without tax. So no tax in, no tax while it grows, and no tax when you take it out if you follow the rules. If you do have a high deductible this is a great way to save for a potential future medical cost.
Tax breaks
The government gives you a tax break on your health insurance if you’re self-employed! The form 1040 has a line where you enter it in and it reduces your adjusted gross income (AGI). Since you pay taxes on your adjusted gross income you’re functionally saving yourself from a decent amount of taxes by taking this deduction. Nice, huh?
Final Thoughts
You need to have health insurance if you’re in the US. It’s not only a smart move for your finances but it’s required to avoid tax penalties. After all, the majority of bankruptcies are due to medical expenses. It’s also good for your health as you remove a barrier to getting primary preventative care. Primary, preventative care keeps you healthy and reduces your overall cost.
Luckily, it’s now easier than ever to get coverage and there are some tax breaks to help you afford it. If you’re a full-time streamer or looking to go full time don’t let concerns about health insurance stand in your way! If you have questions on this or have a topic you want me to explore leave a comment below!
