Sometimes reader questions force me to learn about aspects of personal finance that are outside my realm of experience. For example, I don’t deal directly with health insurance. We’re covered under my wife’s plan, and I’ve never had to think about it before. But insurance is a pressing issue for many people. New reader Eric writes with his predicament:

My wife and I are both self-employed — we value the freedom to continue working for ourselves above all else. Therefor, we view living expenses as evil and always to be controlled.

Topping our list of expenses is this seemingly unmanageable, irreducible item: health care. Our combined monthly insurance premium is just shy of $900, to which we add a separate premium for dental coverage, and a variety of co-pays and deductibles. Even though we’re both young and reasonably healthy, our health care costs exceed what we pay for rent, car insurance, and gasoline combined.

Can anyone offer advice about managing household health care costs? (“Clean living” and “no children” are already on our list.)

I can’t answer this question from personal experience. However, as I was writing about personal finance magazines yesterday, I stumbled upon a recent Kiplinger’s article about finding health care coverage when you’re on your own. In the August 2007 issue, Kimberly Lankford writes:

Buying affordable health insurance is more complicated if you don’t have coverage through your employer. But the truth is that most people can find coverage on their own. And that’s the case even if you’re in a tough situation — you have a medical condition, for example, or you want to retire early and aren’t eligible for Medicare.

Lankford profiles five people without insurance and recommends techniques for them to find coverage while keeping costs low. Some of her suggestions include:

  • Seeking part-time employment — if only temporarily — can be a smart way to obtain health insurance. Policies vary from state-to-state and company-to-company. If you really need coverage, consider this option.
  • If, like Eric, you’re self-employed, you may be able to obtain group rates for health insurance through various trade or professional organizations.
  • Take advantage of COBRA, which provides continuing health coverage for up to eighteen months after you leave your job. COBRA is only available under certain circumstances, but it’s certainly worth checking out if it’s available to you.
  • To keep premiums low, increase your deductible. In essence, do what many experts recommend for auto and home insurance: self-insure by establishing a specific savings account devoted to covering your deductible when needed. Think of this as a sort of narrowly-focused emergency fund. Two of the people Lankford profiles chose a $5,000 deductible in order to keep their costs down.
  • Explore health savings accounts. These new plans work with high-deductible health plans in order to reduce costs. Like an IRA, a health savings account is not something you purchase; it’s a tax-advantaged account used for medical expenses. In essence, this is a formalized means of self-insuring, as mentioned above.
  • Shop around. Don’t settle for the first plan that meets your needs. Lankford recommends using eHealthInsurance to compare policies. To find an insurance broker, she suggests the National Association of Health Underwriters.

To learn more, especially about finding coverage if you have a pre-existing condition, read Lankford’s entire article.

What about you? Do you have experience finding health insurance on your own? What advice can you offer? What pitfalls should Eric avoid? Do you have any tips for making his search easier?

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