What Doesnt Kill You Can Make You Poorer

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Poor health may not kill you, but it could bankrupt you. And baby boomers who are small business owners may be particularly vulnerable, says a certified financial planner who is also a health care specialist.

States with the highest rates of residents without health insurance also rank among states having the highest levels of personal bankruptcies, according to data from the U.S. Census Bureau, the American Bankruptcy Institute and the Administrative Offices of the U.S. Courts (see chart).

The ABI, Alexandria, Va., reported that the total number of non-business bankruptcy filings was 1.59 million at the end of June 2004, down .8% from the 1.61 million cases filed during the 12-month period ending June 30, 2003.

Even so, according to ABI, total business and non-business filings during second quarter 2004 were the second highest 3-month total in history after a high set in 2003.

Boomers who are small business owners should look at a number of options when seeking to have health care in place, says Christina Povenmire, a certified financial planner with CMP Financial Planning, Columbus, Ohio.

The first option is to get on a spouses health plan if that spouse works for another employer, she says.

Another option, according to Povenmire, is to increase the deductible rather than cutting the benefit or coverage period.

She recalls a client who is a head hunter who had a quadruple bypass. Health care premiums were $1,000 a month and because of the economy, he had not had a placement in a year.

His wife is healthy, so she got a high-deductible policy of her own, reducing total premiums by $300, Povenmire explains.

Although not specifically a health care product, in the case of disability insurance, it is better to increase the waiting period than reduce the length of the benefit, she adds.

However, many white-collar workers, she says, are accustomed to first-day coverage and even if they have the reserves to cover a longer waiting period, they prefer to be covered immediately.

If a boomer needs to drop coverage, she says, the first types she recommends dropping are short-term disability and dental coverage.

An association health plan may be one of the options reviewed, says Povenmire, although she cautions that here there is “not necessarily a true benefit.” Although underwriting is not needed, if there is a high amount of claims in the group, the cost might be more expensive, she adds.

If individual coverage is chosen, then Povenmire recommends finding a carrier committed to the local area and not just offering lower rates to gain market share in a geographic region.

She also says she likes health savings accounts. “If a person is self-employed, healthy and in a high tax bracket, it is a wonderful thing.”

However, she adds, if a boomer is a budding entrepreneur, then it is not likely that he or she will be in a high tax bracket. But if a small business owner is anticipating a large contract in the near future, then it is worth considering setting one up, Povenmire adds.


Reproduced from National Underwriter Edition, September 23, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.