Not a stupid question. Most people COBRA. COBRA is expensive but, like a group plan, automatically accepts you. Since the overwhelming vast majority of indie startups fail, COBRA usually lasts long enough to bridge you to your next job.
After about a year or so, if you're not certain you're going to end up with a full-time job, you need to look for real insurance. COBRA will last for almost another year, but when it ends it ends, and god help you if you're hit by a car or diagnosed with something nasty towards the end of your COBRA coverage (nobody will insure you).
Coverage from the majors costs roughly $400/mo. It gets much cheaper if you choose a high-deductable plan (you should), in which case you pay for all your health care out of pocket. A family of four can expect to pay over $10k/yr for low-deductable insurance, which is what virtually all companies offer.
Now, choose your own adventure:
Are you ~22 years old, male, with no dependents, with no long-term health issues and no prior history of hospitalization for illness? You can easily buy high-deductable insurance on the open market. There are several websites that will sell it to you.
Otherwise: you may be screwed. If you don't qualify for a group plan of some sort (which is how most Americans obtain health coverage), you may find that you are uninsurable. For instance, in the first year of Matasano, we tried to get private insurance and found that both my daughter and my wife were uninsurable. My daughter had been hospitalized for a freak seizure when she was 4. Erin has a functioning female reproductive system. NO COVERAGE. Not, "we won't cover the things we don't like". No, NO COVERAGE. Every insurer. The list of conditions with "deny coverage" attached to them, which most insurers publish, includes a wide variety of conditions experienced by tens of millions of people.
I'm usually bearish about the realities of living in the UK but I've suddenly gained 1000 gratefulness points after reading this. Barring crazy gas prices and 20% VAT I don't pay much (if any) more in direct taxes here than I would in the US and I don't have to worry about paying a bean for my family's healthcare (except dental - out of choice).
Yeah pretty much this for NZ. I read that thinking "Man, I'm glad I don't have that risk for being self-employed". I also have private health insurance, but it costs me $11 a fortnight, so I get the best benefits of the public system AND private insurance for doctors visits and elective surgery.
For a limited period of time, they have the right to purchase health coverage at their employer's cost, which is invariably higher than what the employees themselves
Were accustomed to paying.
Plus their employers get to write that extra amount off as an expense, and the employee doesn't have to record it as compensation. This means corporations are subsidized over individuals. This is one of the things the Obama health plan does a good job of fixing.
Fortunately for those in California, any small business with two or more employees that's been around for 3-6 months (incorporate early) can get group coverage at fairly normal rates.
You just go to an insurance broker or provider, pick your plan, and you're all set up in a month or two. The employees do have to fill out medical questionnaires, but regardless of whether they are healthy 25-year-old men or they all have super-cancer, the outcome is a foregone conclusion -- "Approved, 1.10." That means your company pays the statutory maximum of 10% over the typical rates for larger groups.
Because, and of course only because, that's California law. Your company cannot be turned down even if none of your employees would ever qualify for personal coverage.
Yes, this is basically corporate welfare for the benefit of the employees. But it mostly overcomes the health insurance objection to starting a small business, so as far as I'm concerned it's fantastic.
There's an important part you neglected -- only people employed with your company for 6 months count, including founder(s). So if you found a startup, you have to wait 6 months to apply and pay COBRA in the interim.
In the end, we decided it was cheaper to go with individual plans until we grow bigger.
If your S-corp pays for health insurance for employees or dependents, that is an "above the line" deduction and is not subject to payroll taxes (although not outright deductable from income). See an accountant as these laws are changing the past couple years.
Yes, this is correct. It works just like federal COBRA, just longer.
BTW, the fact that I've had to learn all this stuff as part of starting a company is alone a draw on my time to innovate. Go with single-payer and you'd free up a ton of small company officers' time.
What is doubly ironic is that are income tax load (at least in BC) is identical to california before health insurance costs in california. If you add health insurance it's even more. And in BC tech companies get a lot of tax deductions, especially small businesses. The sales tax is about %4 higher, gas is about %25 higher, car insurance is more expensive-ish, food is a little bit more expensive and the shopping isn't as cheap. But that's all dwarfed by the health insurance costs in the US.
Which is odd. Given the social web that we have supporting us in Canada you would expect a much more vibrant entrepreneurial spirit.
Maybe the mindset that lauds and supports this type of support is one that is not willing to take the risks in the first place (at least, not in the same numbers).
The individual insurance market is not quite so bleak for _everyone_ in the US. Some US states, such as New York, New Jersey and Massachusetts, have "community rating" or "guaranteed issue" laws on the books.
It's complicated, of course. There are varying degrees of community rating, and these laws (particularly without a mandate for everyone to buy insurance) sometimes cause insurers to drop out of the market.
In the absence of a mandate, all state guaranteed issue laws do is jack up the cost of insurance for everyone. You simply can't have one without the other.
One of the reasons fairly wealthy people can't retire early is that a major medical event in their family could wipe them out financially. 65 is the standard retirement age in the U.S. for a very good reason - after 65, you are covered under Medicare. Even then, Medicare only covers 80%.
> Erin has a functioning female reproductive system.
Sorry, when you say that, do you mean they wouldn't insure her in case she got pregnant, or am I misreading something? That's shocking, and a stupid drain on being able to start a company.
It should be pointed out that the health insurance market varies by state. I know a woman who never had any problem buying health insurance in her 20s and 30s, but that was in Washington and Nevada, not Illinois.
After about a year or so, if you're not certain you're going to end up with a full-time job, you need to look for real insurance. COBRA will last for almost another year, but when it ends it ends, and god help you if you're hit by a car or diagnosed with something nasty towards the end of your COBRA coverage (nobody will insure you).
Coverage from the majors costs roughly $400/mo. It gets much cheaper if you choose a high-deductable plan (you should), in which case you pay for all your health care out of pocket. A family of four can expect to pay over $10k/yr for low-deductable insurance, which is what virtually all companies offer.
Now, choose your own adventure:
Are you ~22 years old, male, with no dependents, with no long-term health issues and no prior history of hospitalization for illness? You can easily buy high-deductable insurance on the open market. There are several websites that will sell it to you.
Otherwise: you may be screwed. If you don't qualify for a group plan of some sort (which is how most Americans obtain health coverage), you may find that you are uninsurable. For instance, in the first year of Matasano, we tried to get private insurance and found that both my daughter and my wife were uninsurable. My daughter had been hospitalized for a freak seizure when she was 4. Erin has a functioning female reproductive system. NO COVERAGE. Not, "we won't cover the things we don't like". No, NO COVERAGE. Every insurer. The list of conditions with "deny coverage" attached to them, which most insurers publish, includes a wide variety of conditions experienced by tens of millions of people.
Good luck!