[Baypiggies] Med Insurance, Self Employment, etc.

Roderick Llewellyn roderick at sanfransystems.com
Thu Feb 17 01:39:08 CET 2011

I totally agree with Wai Yip. This may be slightly off topic of course, 
but it's something to think about.

Now here's another twist. If you form your own company, for example a 
Limited Liability Company (LLC), or a C-corp (not recommended unless you 
REALLY know what you're doing), and you have at least 2 operating 
members (i.e., owners/managers), by California law, the insurance 
companies CANNOT deny you coverage based on preexisting medical 
conditions! They CAN deny you coverage based on the financial "health" 
of your firm: typically you must make something like $25,000 I think in 
gross revenue (you don't have to turn a profit - GM went bankrupt but 
you bet their insurer didn't cancel them, as long as they paid the 
premiums!). This is in fact how my partner and I got covered, as we were 
both denied individual coverage. So if you can form a 2-person company, 
this is a good way to go. As a contractor, most firms want a 
corp-to-corp relationship anyway. They consider filing form 1099s 
dangerous, as the IRS has been known to challenge individual 
contractors, claiming that they are in fact employees and that the 
employer is just trying to cheat the IRS out of some tax money. With a 
corporate form (by that I'm including LLCs and C-corps, and S-corps), 
you get some limitation of liability. It's not total... there is the 
"piercing the veil" business that, for example, doctors routinely face. 
But I strongly advise anybody who is setting out on the contractor road 
to strongly consider forming an LLC. It is taxed like a partnership. The 
LLC itself pays no federal or state taxes (although California will 
charge you $800 per year and a few miscellaneous fees, and San Francisco 
has a half-percent gross receipts tax, so if you pull in $150,000 per  
year, SF will ding you for $750). Instead the profit from the LLC flows 
directly onto the tax forms of the owners. Furthermore, if you have two 
or more owners (needed for the medical insurance issue), you have a lot 
of flexibility about assigning the revenue to each owner. I'm not an 
accountant, so research this stuff on your own, I'm not qualified really 
to give this type of advice.... but I'm giving it anyway lol.

Now group plan insurance coverage, which is what the corporate insurance 
is, is typically more expensive than individual plans. So if you can get 
an individual plan now, my advice is to get it and stick with it, even 
if it seems like a waste of money.

Concerning Elizabeth Leddy's experience: I'm glad you weren't mashed up 
worse in the bike accident. (I bike myself quite a bit!). Yes Anthem is 
evil but I did go with them as the others were WAY more expensive for 
group coverage. But yes don't cheap out entirely. You were in a sense 
"lucky" that it didn't cost $100,000 or more. People who haven't had 
major illnesses don't realize how unbelievably expensive medical care 
can be. The insurer usually doesn't mind that much paying for an 
accident; they generally only happen once, and when you're recovered, 
that's often the end of it. It's those lingering diseases that really 
ring up the charges and force you to sell your house and all.

As far as the medical insurance reform bill is concerned, it's something 
like 1,700 pages and no I haven't read it. Obviously the Republicans 
want to eliminate it, and they have a good chance to do so. Even if that 
doesn't happen, the bill's effects are difficult to predict. For 
example, it would set up insurance exchanges, but would that really mean 
that older or sicker people would be able to get coverage? What would 
mandate that? Not clear. Would you be guaranteed coverage, but not 
guaranteed a price, so that yes you could buy coverage but it would cost 
$100,000 per year? ... as Anatole France said, "The poor must work for 
this, in presence of the majestic quality of the law which prohibits the 
wealthy as well as the poor from sleeping under the bridges, from 
begging in the streets, and from stealing bread." Again some unsought 
advice: don't depend on the American government for anything, unless you 
are a rich corporation.... then it's party time. Too bad it's so cold in 
Canada. - Rod L.

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