When people shop for health insurance policies, they find that individual policies are expensive. The policies are also limited to people in good health.
This is reasonable. Insurance is possible only because of the law of large numbers: random distribution. Companies want the likelihood of payments to be random in each case. Being in poor health makes a person non-random.
One way around this is through a group policy provided by your employer. Small business owners sign up for these small business policies because the premiums are lower than individual coverage policies.
But there is a little-known problem with most of these policies. Say that a worker gets a really serious long- term illness. The insurance company now faces huge bills. Most small business policies allow the insurance company to hike the premium in the following year and the year after. The insurance company can keep doing this until the business cancels the policy. The insured worker -- now uninsurable -- then faces a financial disaster.
If the policy covers a large group, such as a trade association, the insurance company cannot hike the premium for every participant unless the entire group somehow has become a higher risk to insure.
If you are covered by a small-business policy, it's time to read the fine print. I recommend seeking coverage somewhere else. If you ever become uninsurable through illness, you're in big trouble.
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