In Colorado, there is underwritten health insurance and there is guaranteed issue health insurance. Underwritten health insurance has a much lower cost structure because they aren’t covering pre-existing conditions at all or without covering the cost with a premium increase, so it costs much less if you can qualify for it. Employers that are paying for their employees health insurance are required to purchase non-underwritten (guarantee issue) health insurance so they won’t be tempted to discriminate hiring based on health conditions.
Because underwritten (individual/family) health insurance is so much less expensive, it’s the best choice for self-employed people who can qualify. But self employed people who don’t qualify because they have health conditions have the option of getting a business group of one policy (BGO1). But (usually) only people with expensive health conditions sign up for a BGO1 because there is such a difference in price. This makes these types of plans very expensive when all of the people insured on them are using the heck out of the benefits.
Well, I had a client call this morning to sign up for a BGO1. I happened to ask her what her health conditions were that she needed this type of policy. She said they were perfectly healthy, but they get a BGO1 because they can deduct the premiums. (They are a corporation, so they can’t deduct individual health insurance premiums) And it’s such a big deduction that they can’t justify not having a BGO1.
Even after I showed her that an underwritten policy would cost around $270/month and a similar BGO1 would cost around $740/month, she couldn’t stand losing that deduction. She even said her accountant gave her this advice. I bet he also tells her not to pay off her mortgage early because a mortgage is a good deduction.
