Is Health Insurance the Next Real Estate in Terms of Investment?
Health insurance-related investments/startups are poised to be the next gold rush, not least for one reason: lifetime renewals.
Appreciating assets, renewal income and capital gains tax rates are all hot topics in the investment and entrepreneur space, but most people's explorations of where to invest to capitalize on them are tired. One wildly undersung option is in the health insurance and associated Medicare sectors, which are on fire because of a maturing Affordable Care Act market and the surge of people aging into Medicare (frequently referred to as the "silver tsunami".) Why are most investors letting a few people with flimsy business strategies steal this thunder, seemingly overnight? Well, it's simple really: Insurance is not viewed as an attractive medium.
Here's why that's wrong.
An appreciating asset is simply something you own that goes up in value over time. It's a subjective concept, too, because typically, an asset that appreciates can also depreciate. Someone who's owned real estate over the last 10 years would likely have experienced appreciation, but if they owned it in 2008 might have seen value decrease. Over time, however, there are certain assets that go up much more often than they go down. Medicare and health insurance renewals, for example, are valuable due to the federal Centers for Medicare & Medicaid Services raising commission guidelines to keep up with the cost of doing business over time. Also, some commissions are based on percentages of premium; as inflation occurs, they do, too.
This term essentially means getting paid (typically for an extended period of time) for something you did once. That isn't necessarily as simple as it sounds, because in the health insurance and senior financial markets, businesses that do best provide lifetime service to their clients. However, this can be relatively low-service work, and involve heavy renewal commissions, regardless of need for ongoing services. Some plans like ACA plans, Part C Medicare Advantage Plans, and Medicare Part D prescription drug plans can pay lifetime renewals. Others, like Medigap or Medicare Supplement policies, may have six-year renewal chains. There are also some heaped compensation products like life insurance, annuities and ancillary plans that have the majority of the compensation tied up in the first year of the policy's existence.
Capital gains tax effects
There are many ways to be taxed on income or assets, and capital gains are currently taxed less than earned income. This disparity is relevant here because your business or book of business in insurance is an asset that, if sold, would be taxed as capital gains, which could be of huge benefit. A frequent occurrence in this industry is the building of a solid book of business, then selling it to a private equity backed group.
The quick takeaway is that if you are looking for a profitable and meaningful business opportunity, exploring health insurance and Medicare-associated products could be an attractive option. If you have just a little capital to invest, it may be better to reach out to someone with a profitable model and hire them as a consultant to get you started, or you could find someone to work for in these sectors. But technically, all you need to get started as a solopreneur is a life and health insurance license, Federally Facilitated Marketplace Certification and the America's Health Insurance Plans certification. The learning curb can be steep, however, so make sure to seek support from one of the many Facebook Groups, like Medicare Gurus.
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