Editors Note: This issue contains two items - my usual report and another guest article by John M. Amsler. John's article is about health insurance for the self-employed. I don't know anything about John's approach or company so you'll have to investigate for yourself. Thanks for the article John.

The way I handle health insurance is to find the least expensive, high rated company, which can provide high deductible catastrophic insurance. I use an insurance broker to do this. My family of four is currently billed at well under $200 bucks a month. In fact, I just saved $600 a year by finding a less expensive company when my previous company raised their rates. FYI, the company I'm now going through is Golden Rule. If they raise their rates, I'll look again next year. Of course you have to pay all your own health costs out of pocket during the year. I am only buying protection for a worse case scenario.]

--------------------
Independent Ramblings

Since writing newsletter 11 I’ve finished most of the contracts I had in the pipeline then. This even included a basement remodel where I was making quite a bit less than my usual developer rate. I really kind of enjoyed it and the work got me back in shape enough to not feel guilty spending a full day in front of the PC once more.

I purchased the new Visual Studio from Microsoft and have been working through the how-to books learning how it all fits together. It’s a huge piece of software but I figure it will take a year or so for this skill set to really be in demand so I’m taking my time.

While I have a few small contracts in process, all in all I’m waiting out the market, as I’m sure many others are. Once you are firmly entrenched in the independent way of life, you’ve learned to roll with the ups and downs in the market with a certain degree of serenity.

Personally, I feel a lot safer being an independent than when I had a full time position. As an independent you build your lifestyle around variable income. This is not the case with a full time job where you tend to develop steady paycheck habits that cause problems almost immediately if you are laid off.

An example would be the health insurance thing. While it’s nice to have a full coverage policy, once you become an independent and are facing a monthly cost of $500 or more just for full coverage it’s likely you’ll modify your position. I dare say that doing so might even give you insight into the whole insurance debacle that may have eluded you when the employer paid for it all.

Another example is housing. Yeah, that new-built house might look good when it seems like the paychecks are always there, but as an independent you might instead be looking at a fixer upper with a rental property on it in order to keep costs down. The weird and wonderful thing is that once you’ve lowered your monthly costs, you start finding days to actually go fishing during the week while letting your potential deals work themselves out. I guess you could say living with uncertainty is an acquired skill that you can only develop by going out and doing it. Though as the last newsletter talked about, it really helps to have your ducks in a row before venturing out.

Change of subject. I sublease part of my office (keeps the cost down – see previous) to another independent that deals with the CRM marketplace. He is on the human resources side of the fence. We have some great conversations about recruiters, employers, W2 contractors, and 1099 independents. Here is what I’ve clarified in my own mind from my conversations with him:

Most recruiters will first seek W2 contractors to fill contract positions. That’s because the spread (i.e., the commission the recruiter gets) is so much better for the recruiter if they place a W2 contractor then a 1099 independent for the same position.

In good IT economic times, one type of agency will hire a bunch of W2 talent in-house only to let them go when things slow down. This obviously won’t work if you want to remain an independent since you are bound to the hiring agency.

Another type of agency will hire you as a W2 contractor and it’s expected you’ll leave when the contract ends. This works ok for 1099 independents and I’ve taken this approach when the job is right. You will make less than you would if you were hired direct.

It’s worth noting you’ll almost never be able to get a contract job direct with the company who is using an agency because the food chain favors single-call talent procurement. Like it or not, it’s easier for enterprise level companies to fill temporary assignments through an agency. If you know someone in the hiring company you might have an edge that gets you in the door and in this case you should be able to charge the same rate an agency would charge.

Some agencies will hire you as a true independent “corp-to-corp”. This usually happens when the agency can’t find W2 talent quickly enough to fill a hot position and need talent immediately. In this situation, a wise independent will make sure that they are getting close to normal rates since you are off-loading all the tax and other benefit burden from the agency. Most agencies are well aware of this and expect to pay higher rates in this case.

In addition to easier talent procurement, another reason you’ll find it difficult to compete with agencies for enterprise level contracts is tax laws that essentially create fear in the hiring company. The fear is that you will be treated as a regular employee by the IRS in which case the hiring company will be liable for back taxes, fines, workman’s comp, etc.

What is left in the contract market for the independent are smaller jobs, jobs from contacts within an organization, and jobs for companies that can’t afford to use an agency. This isn’t 100% representative and I’m sure you’ll find plenty of stories of contracts that fall outside this scenario, but I’d wager it’s generally true.

One good target for independents is non-profit organizations. If you can navigate the payment (or lack thereof) minefield you’ll find that non-profits are chronically understaffed in IT. It’s a good way to make contacts that lead to other solid contracts.

While you can make like an agency recruiter and go after the enterprise positions you’ll find it an uphill climb unless you have strong personal relationships with the decision makers.

If anyone has something to add to this summary of the contractor world please put together a newsletter article I can publish. We’ll all thank you for it.

-Clint Lewis
ColoradoIndependents Editor


--------------------
Health Insurance for Independent Contractors (by John M. Amsler)

While being an independent contractor offers many attractions, the ability to obtain adequate health insurance isn’t one. Many begin contracting while on COBRA, a federally mandated continuation of benefits program requiring the former employee to pay the full price for health and life insurance. Most of us have immediate sticker shock, since the employer is no longer contributing. The government requires COBRA be offered terminated employees for up to 18 months.

Given the current economic instability, let’s look at risks for the independent contractor. You pay your new premium monthly, but suppose your former employer goes out of business or changes healthcare insurance providers. In either case, the former employee is suddenly left without coverage. No problem, right? Wrong! If there is a family member with health problems, they may not be accepted by other insurance companies. Of course, if you’re in good health, i.e., you don’t need health insurance, you can get it.

Looking at a better scenario, let’s suppose your spouse is employed and able to cover you under their group policy. Great! The only problem here is that insurance companies customarily don’t cover you while you’re working. The theory is that you’ll be covered by Workmen’s Compensation. If you’ve priced Workmen’s Comp lately, you’re probably looking at the other half of your income that doesn’t go to federal, state, and self-employment taxes. So that is not a viable option. If like many, your office in your home, how do you distinguish between work and home life? It becomes hard to determine. So might your coverage.

There is a solution, however. The National Association for the Self-Employed recognized these weaknesses and searched for an insurance company to write policies that covered you 24-hours a day – working or not. You choose the doctor and hospital. You cannot be singled out for rate increases or cancellation. Policies are tailored to meet your needs, so you don’t pay for things you are unlikely to use. For more information, contact John Amsler, 303-442-5516, www.naseweb.com/johnamsler.htm.