Solo advisers scramble for health coverage

NEW YORK — Advisers who start their own practices after leaving larger firms often find that their biggest obstacle is obtaining affordable health insurance for themselves and their families, observers say.
“One health insurer quoted $32,000 a year just to insure me — it wasn’t even for family coverage,” said Chris Cooper, president of Chris Cooper & Co. Inc. in Toledo, Ohio. And the policy was full of exclusions and deductibles, he added.
“Anyone who gets his health insurance from someone else, and does not buy it and pay for it all on his own, is not truly independent,” Mr. Cooper said.
“When I went out on my own, my wife and I had to write so many letters to insurers who wanted to exclude certain conditions from our coverage,” said Bradley Teets, president of KDT Investments in Punta Gorda, Fla. “It’s so hard to find good health insurance at a reasonable price when striking out on your own,” he added. He finally located a Blue Cross/Blue Shield health policy that is costly but provides decent coverage.
“I think [Washington-based NASD] ought to provide a health insurance plan for advisers,” Mr. Teets said.
“When I started, I was in a traditional preferred provider organization, paying $900 a month for family coverage,” said Ted Toal, principal of Toal & Associates LLC in Annapolis, Md.
He then switched to a high-deductible plan with a health savings account and is now paying $240 a month, he said.
While advisers thrown out of employer group plans have the legal right to continue coverage under the Consolidated Omnibus Budget Reconciliation Act, they must pay the premiums themselves — which are capped at 102% of the group premium — but can be $1,400 a month or more for family coverage, observers noted. Also, COBRA coverage expires after 18 months.
Trade help sought
Many financial advisers look to their trade associations for coverage, with mixed results.
“One newly independent adviser I tried to find coverage for was uninsurable due to poor health,” said Mike Crifasi, president of CEI Financial Planning Inc. in Atlanta. He obtains insurance for members of the Denver-based Financial Planning Association who have lost or never had employer-provided benefits.
“I told him to go back to work for a company so he could get into a group plan,” Mr. Crifasi said.
Some of the advisers seeking coverage were thrown out of their employer’s group plans — or fired — for failing to meet proprietary-product quotas (InvestmentNews, March 19), while others are independent contractors looking for quality, inexpensive coverage.
Advisers who fail to meet quotas are often switched to part-time or independent-contractor status, making them ineligible for the employer’s benefit plan, Mr. Crifasi said. “The benefit plans are intended for the top producers,” he added.
Mr. Crifasi was able to negotiate group life, disability and long-term-care-insurance programs for FPA members but has found it impossible to obtain a group health plan. The best he can do is try to negotiate individual coverage for members at market rates. If the member has a health problem, the standard premium can quadruple, he said.
The National Association of Personal Financial Advisors in Arlington Heights, Ill., also has had little luck obtaining an affordable group health insurance plan for its members, said special-projects manager Nancy Hradsky.
The problem is “adverse selection,” she said.
“Health insurers are afraid that only advisers who had a tough time finding coverage elsewhere would bother to enroll,” Ms. Hradsky said. “We tried to do a plan through an association resources group, but it wasn’t true group health insurance, because it was significantly more expensive and not available in all states,” she added.
One organization that provides health insurance and other benefits to advisers is the Wealth Advisor Institute in Washington. For a $300 annual membership fee, advisers have access to health, life, disability, dental and vision plans at lower group rates, said Keith Gregg, chairman. He is also a principal at Dunham & Associates Investment Counsel Inc. in San Diego.
The biggest problem facing advisers coming out of employer-provided health plans is pre-existing medical conditions, said Tom Froelich, WAI’s membership chairman and principal of Froehlich Financial Group Ltd. in Spring Lake Heights, N.J. They usually must wait six to 12 months before such conditions are covered by a new plan, he said.
“Advisers should seek group coverage through their local chambers of commerce,” said Anthony Domino, principal of Associated Benefit Consultants LLC in White Plains, N.Y. He is a former president of the Society of Financial Service Professionals in Newtown Square, Pa. The chambers of commerce have a larger applicant pool than trade associations, so insurers are less nervous about adverse selection, he noted.