Health Insurance and Downgrading Your Job

In April 2010, my wife made the choice to step away from her job for the rest of the year in order to be a stay-at-home mom. She chose that period because she knew that she loved her job and that she would be itching to return after nine months.

Her employer made it possible for her to return to her previous position when her leave period ended, which was very gracious of them. Of course, that left us with a period of eight months without health insurance coverage if we did not pay out of pocket.

During that period, my income and our savings paid for our health insurance out of pocket. My wife was able to enjoy a period of staying at home with the children – and it was quite enjoyable for all of us. Our oldest child attended morning preschool and our three year old attended thrice-a-week morning preschool, but aside from that, the five of us were at home. My wife spent time with the kids and I split my time as best I could between work and spending time with all of them.

At the end of that period, my wife chose to return to work, not because we needed her income or her health insurance coverage, but because she missed the joy that she gets from her work.

During that period, the health insurance was a serious expense. If it were not for our living expenses being as low as reasonably possible and having a very healthy emergency fund, we would have really struggled to make this work. As it turned out, the reality of that period showed us that we could have done it for a few years, but my wife wanted to return to work at that point, making the question moot.

A more detailed explanation of the affect downgrading your job has on your health insurance exists in The Simple Dollar’s Guide to Health Insurance, but I’ll briefly go over the main points here:

1. Plan ahead for your health care needs. Where are you going to get health insurance from if you make a major career change? This needs to be one of the first things you think about, and it becomes more urgent the older you are.

2. A married couple only needs one person with insurance. Self-employment is much more difficult if you’re single because you don’t have a spouse’s insurance to rely on. It’s perhaps not fair (I don’t believe it is, but I don’t have a better idea that doesn’t involve a great deal of government interference), but it’s simply the fact of the situation. If you’re single, self-employment means that you have to come up with your own insurance. If you’re married, you can rely on your partner’s insurance (assuming they have them).

3. Never, ever burn bridges. When you make that leap, you may find that you wish to return to your previous career path if the new path doesn’t work out. Never, ever burn your bridges on the way out the door. Do everything you can to make the transition as smooth as possible and leave with good relationships with everyone. While this won’t mean you’ll get your old job back if things don’t work out, it does mean it’ll be easier for you to return to that career path if you need to. That’s a great hedge if you find out that health insurance isn’t working out.

4. COBRA can really be your friend. COBRA isn’t just G.I. Joe’s nemesis. It’s a federal law that, if you worked for an employer with more than 20 employees, ensures that if you quit your job, you can continue your current health insurance plan for up to eighteen months if you pay the premiums out of pocket. That can be incredibly valuable for a potential entrepreneur.

5. A healthy savings account is absolutely vital. Of course, the key is that you will have to pay premiums out of pocket under COBRA. That can be quite expensive, so the best route to take is to make sure you have enough money saved to cover that insurance for you and your family if you do downgrade your job. Know how much your total premiums actually are and plan for paying for that amount out of pocket. The passage of the Affordable Care Act has opened up other savings accounts: health savings accounts (HSAs).

Obviously, you can shop around for your own insurance and you may be able to find a better package than what you’re able to get through COBRA, but in either case, your savings is vital. It can make the difference between having health care insurance and not having it, and that can make the difference between success and failure.

6. SCHIP and Medicaid are also potentially vital. Both of these plans offer health insurance for low income folks, particularly children. I won’t get into the details of these programs, but if you see a major downward change in your employment coming in the future, you’ll want to know more about these plans.

The key, as always, is to be proactive. Such programs won’t magically appear on your doorstep. You have to be proactive and seek out such solutions. It might take a lot of phone calls, a lot of emails, and a lot of time to find out the details about such programs, but it’s far better to invest that time and effort now and ensure your coverage than to go without.

A final note on the future As I write this, the future of national health insurance in the United States is up in the air. While I am unsure about the specific provisions of the Patient Protection and Affordable Care Act (often termed “Obamacare”), I do think that some form of universal access to health care rather than the piecemeal system we have now would be very beneficial to everyone involved. It would allow entrepreneurs to jump into business plans that they might have otherwise avoided. It would also allow manufacturers to be competitive with overseas manufacturers who do not have to shoulder health care for their employees. While I’m not a politician who has to balance the beliefs and voices of a very wide political spectrum (and I’m glad of that), I do think that everyone – rich and poor – benefits if we work on finding a good solution to the health care problem rather than bickering and fighting and name-calling.

If you want to jump into self-employment or downgrade your job, let your congressperson know that you’re a potential entrepreneur in his/her district that would find starting a small business much easier if there was a palatable solution for health care that makes entrepreneurship easier and more accessible to everyone. There’s money to be made there for everyone involved – the entrepreneur and the health care provider.