Health Insurance Becomes Critical After Job Loss

As well as ending your chief source of income, jobloss may have further repercussions affecting your health insurance. You will need to decide what to do about health insurance if your employer has been providing your coverage.

The temptation might be to go without it to save money, hoping nothing befalls you before you find a new job with insurance. However this would probably be a mistake. Even the young and healthy can suffer broken bones playing sports or through a car accident and rack up steep medical bills.

So what other choices are there? For Americans, when you lose a job, you have certain insurance rights under federal and state laws.

You will need to consider your options. First are the ‘Spouse's benefits’. Do you have a spouse who has insurance at work? If so, under federal law you can enroll in your spouse's plan even if it's not open-enrollment time. You have up to 30 days to enroll if you left your job voluntarily; it's longer in some states, depending on circumstances.

This might be your best option. Employer plans tend to offer more generous benefits than individual policies, and the employer usually picks up a big part of the tab. Plus, there's no medical underwriting in group plans, so any health problems you might have won't prevent you from joining, said Brenda Wilson, chief of health insurance and managed care at the Maryland Insurance Administration.

Also available is ‘Cobra’, the federal law (Consolidated Omnibus Budget Reconciliation Act) that says you must be allowed to continue coverage under your former employer's plan for up to 18 months after leaving the job. It applies to companies with 20 or more workers. You won't qualify, though, if you were fired for "gross misconduct."

Cobra is the easiest option and one that many people choose. If you can't join a spouse's pla
Cobra also is your best bet if you have health problems that might make it difficult or impossible for you to buy a policy on your own. But coverage under Cobra isn't cheap. You will pay the full cost of premiums and may be charged an administrative fee.

In some states you are entitled to buy an ‘individual conversion’ policy from the insurer providing your former employer's plan regardless of your health. Benefits under these conversion policies are typically stingier than what you had before, and the premiums are higher, Wilson said. "It really wouldn't be a good option if you have other options," she said.

If coverage through Cobra is too rich for you, don't assume you can't afford insurance and must go without it. You might find cheaper coverage by buying an individual policy for yourself and your family.

Insurers will ask questions about your health to determine whether to sell you a policy, at what cost and what coverage might be excluded.

Once you qualify for a policy, it can't be canceled unless you drop coverage or reach the policy's lifetime benefit cap, which often runs $3 million to $5 million, said Samuel Gibbs, senior vice president of Mountain View, Calif.-based eHealth Inc., which owns online broker eHealthInsurance.com.

Gibbs said the price difference betwee
Cobra and an individual policy can be significant. Last year the average policy cost $148 a month for a single person, compared with $380 under Cobra. A policy for a family averaged $344 a month, compared with $1,029 under Cobra. Cobra premiums tend to be higher because employer plans have rich benefits, Gibbs said. To keep costs down, "only buy the coverage you need," he said. A healthy 22-year-old male, for instance, can go without maternity benefits or prescription drug coverage, he said. When shopping, look at two or three insurers and then at two or three policies within each of them, Gibbs said. n