For a farmer or rancher, health insurance can be expensive. And it can be hard to get. And after health care reform kicks in – well, it should all get easier, and may get less expensive up front. But there remains a lot of uncertainty over who, ultimately, will pay the bills.
That’s the judgment of Ken Tillman, who’s been the Arkansas Farm Bureau’s staff health care specialist for 33 years. Tillman’s official title is Rural Health Programs Coordinator; he told Ozarks Farm & Neighbor that Farm Bureau “has given me kind of a free hand to go in any direction that would benefit the organization. So I’ve tried to connect us with all of the health care players and planners, and I think we’re pretty well positioned.”
Self-employed entrepreneurs like farmers and ranchers, Tillman said, will find the cost of small employer coverage to be prohibitive; those who buy health insurance usually do so through what is called the “individual health market.” Whether they buy their coverage through Blue Cross-Blue Shield or through a for-profit carrier, they’re placed in a pool with other people who buy individual plans at about the same time. “From Day One,” Tillman said, “the pool begins deteriorating, which means that pretty quickly the rates are going to start spiraling upward”; while an employee of a larger business is typically part of a health plan that includes an employer contribution, the individual buyers are “getting that wave full strength on their faces.”
One thing that eases the burden is health insurance costs for the self-employed, as well as their spouses and dependents, can be tax-deductible. In order to claim the deduction, the allowable level has to be calculated; the IRS says this is done by subtracting from self-employment income the 50 percent deduction for self-employment taxes, as well as any retirement contributions you make to SEP-IRA, SIMPLE-IRA, or Keogh plan.
There are a couple of potential disqualifiers; if your self-employment income is from a Schedule C business, and you report a net loss on Form 1040 Line 12, then you are not eligible to deduct your health insurance costs. Also, you cannot deduct any insurance costs for any months you were eligible to participate in a group health insurance plan through your or your spouse’s employer. For example, if you paid for 12 months of health insurance coverage for yourself and your family, but you became eligible to participate in your spouse’s group health insurance in December, then you can deduct only 11 months worth of insurance premiums.
Other ways to reduce the cost of health insurance are more painful; you can opt for a higher deductible, accepting higher out-of-pocket expenses while still maintaining coverage in the event of a devastating injury or illness. Tillman said plans with $500 deductibles were once common; now, “most people are looking at $1,500 or $2,000, or higher.” Once the initial threshold is reached, the insurer pays 80 percent of expenses up to maximum stop loss point, at which full coverage takes effect.
It used to be that another way to save money was to be in good health; now, though, if you’re not, a private insurer may not offer a policy at all. “It’s all about risk,” Tillman said. “If you represent, not necessarily a user (someone who will file claims), but even the risk of being a user – you have elevated blood pressure, you’re flirting with diabetes, you’ve already had a health factor risk like high cholesterol identified, and so forth – then these days, chances are you won’t even pass medical underwriting to be admitted into that plan.”
If you pose a more marginal risk that the underwriter will have to pay out, you may have to wait 12 months after you start paying premiums for your coverage to take effect. Tillman said Arkansas is among several states that maintain a high-risk pool for people who can’t pass medical underwriting; in Arkansas, the rates can be no more than 150 percent of the normal rate for a good risk subscriber. If that doesn’t cover the cost, those insurance companies that are participating in that market pay a fee. Oklahoma also offers a Health Insurance High Risk Pool.
The massive Health Care Reform bill remains an enigma. “Most of those broad sweeps in that 2,000 page document are not defined yet,” Tillman said. “Regulations have to be written.” But what’s known is that in 2014 the federal government will establish an insurance exchange, which should allow people to shop for a better rate; guaranteed issue; exclusions for pre-existing conditions will be outlawed. What’s still not clear, he said, is who will pay for this expanded coverage. “The Health Care Reform bill doesn’t start off with controlling health care cost in a meaningful fashion,” he said. “So, it’s just a bunch of good things that are out there, and no definition of who’s going to pay for it, or whether we’re even going to pay for it.”
