Health Insurance Options After a Job Loss

It's hard enough facing the financial and emotional trauma of losing your job. One of the issues you may confront is the loss of your employer-provided health insurance as well. While there may not be a simple solution to your health insurance dilemma, you should understand your options.

COBRA

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides for continued access to health insurance for people who lose their employer-sponsored coverage due to termination of employment (among other triggering events).

Under federal law, employers with 20 or more employees that provide health insurance are required to offer COBRA coverage. As a qualifying employee, you can remain on your employer's plan for up to 18 months. However, you must pay the cost of COBRA insurance, plus a 2% administrative fee, unless your employer pays some of the cost. But you can't be turned down due to pre-existing health conditions, and the coverage will include your family if they were also covered under your employer-sponsored plan.

Note: The American Recovery and Reinvestment Act of 2009 (ARRA) provides that, for involuntary terminations that occur on or after September 1, 2008, and before January 1, 2010, assistance-eligible individuals will only need to pay 35% of COBRA premiums for a period of up to 9 months. The remaining 65% of premium cost will be subsidized by the federal government.

State programs

If your employer has gone out of business, stopped offering health insurance, or is too small to qualify for COBRA, you may still be protected. Many states have laws that provide health insurance continuation programs similar to COBRA. However, the laws of each state may differ as to employee qualifications, length of coverage, spousal and dependant benefits, etc. Check with your state's labor department or insurance commissioner's office for more specific information.

Your spouse's coverage

If you have a spouse who is working, he or she may have access to employer-sponsored health insurance. If your spouse qualifies for coverage, you and your family can enroll in your spouse's plan without having to wait until the plan's regular enrollment period, and you can't be excluded for pre-existing health conditions.

But don't jump to your spouse's plan just because it's cheaper than your COBRA coverage without considering some important factors. Your spouse's plan may not offer as many benefits as your COBRA coverage. For example, your spouse's insurance plan may not cover your doctor or your preferred medical facility. And while that plan may cost less because of greater employer contributions, if your spouse gets sacked, your spouse's COBRA coverage might cost more than your COBRA coverage. So before switching health plans, compare your spouse's plan benefits to your COBRA coverage, consider the security of your spouse's job, and find out what your spouse's COBRA coverage would cost.

Insurance through an organization

Often, various groups and organizations such as fraternal clubs, religious groups, unions, and local chambers of commerce offer health insurance to their members. Because the coverage is based on a group, its cost is usually less than comparable private insurance. But coverage may be offered through only one insurer, the plan benefits may be limited, and co-payments and deductibles may be higher than under your current plan.

Private health insurance

Another alternative is private individual or family health insurance. Private insurance gives you the greatest choices for plan benefits, but it most likely will cost more than coverage through your former employer. Also, you or members of your family could be denied insurance coverage due to pre-existing medical conditions unless you meet specific HIPAA qualifications.

More options

Other cost-effective choices include high deductible individual plans and the federally subsidized, state-administered Children's Health Insurance Program (CHIP), which is available for families with modest incomes. Contact your state insurance department for more information.