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Keeping Your Health Insurance When You're Unemployed

Recession also means many people will lack coverage

November 17, 2008

• Health-Related Bankruptcies Up 50 Percent • House Panel Hears From Consumers Who Lost Insurance • Harvard Study: 60% of Bankruptcies Caused by Health Problems • Hospital Stays Increase for Uninsured Americans • Keeping Your Health Insurance When You're Unemployed • Hospitals Score Low in Patient Survey • Lack of Children's Health Insurance Increasing Across the Board • Uninsured Aren't Primary Cause of Crowds in Emergency Rooms • Census Report Shows Increase In Uninsured • Hospital, Health Insurance Costs Skyrocket • Medical Bills Leading Cause of Bankruptcy, Harvard Study Finds • U.S. Health Care Most Expensive & Most Error Prone • Retirees Underestimate Health Care Costs • Per Capita U.S. Health Care Costs Triple Canada's --- • More Health News ...

With the economy rushing headlong into recession, thousands of people are suddenly finding themselves unemployed. Perhaps just as distressing, they are finding themselves without health insurance.

Since most U.S. health care policies are provided through employers, suddenly being without work requires some scrambling to make sure you and your family have medical coverage. If both spouses are employed, perhaps the best alternative is to have the working spouse sign up for coverage, if it's offered.

When that isn't an option, paying for health care coverage becomes a reality, adding the burden of premium expense at the worst possible time -- when you've just experienced a dramatic loss of income.

Under the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions in 1986, a terminated employee has the right to maintain the same health coverage they enjoyed before – only now they have to pay for it.

Many jobless Americans are shocked to learn that the health plan, either paid for by the employer or deducted from each paycheck, costs so much. The average payment under COBRA can be around $1,200, and much higher if your company had a really good health plan.

Another alternative is to purchase your own health insurance. There are some advantages to this, since you can scale back the coverage to your essential needs, to save on monthly premiums.

Assurant Health, which specializes in policies for the self-employed, also provides what it calls "unemployment health insurance." This temporary insurance can be purchases for as 30 days or as many as 365 days. Premiums depend on the amount of coverage, but are usually less than continuing your old policy under COBRA. But even Assurant says this option might not be right for everyone.

"It is important to note that unemployment health insurance from Assurant Health is intended to cover you in the case of an unexpected illness or injury and does not cover pre-existing medical conditions," the company says on its Website. "So, in some instances, COBRA insurance many be a better option than interim insurance. The advantage of continuing on your current plan through COBRA is that any ongoing treatment or medical condition may be covered without interruption."

To be eligible for COBRA coverage, you must have been enrolled in your employer's health plan when you worked and the health plan must continue to be in effect for active employees. COBRA continuation coverage is available upon the occurrence of a qualifying event that would, except for the COBRA continuation coverage, cause an individual to lose his or her health care coverage.

COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available when coverage is lost due to certain specific events. If you lost your job in a downsizing, for example, you're probably eligible. If you were fired for gross misconduct, on the other hand, you may not be eligible.

Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. It is ordinarily less expensive, though, than the same individual health coverage. But again, a private plan with fewer benefits and a higher deductible may be much less expensive.

If the loss of a job has left you with little or no income to pay for insurance, Medicaid may be an option for you. And if you and your spouse don't qualify, your children might.

Medicaid is available only to people with limited income, and if you're out of work, chances are you meet that criteria. However, you must meet certain other requirements in order to be eligible for Medicaid. Medicaid considers your assets as well as income. If you have a home, a life insurance policy with cash value, or other types of savings or investments that could be sold, you will probably not qualify. The rules vary state to state. Click here to contact your state office.

In the end, Medicaid may not prove to be a viable option for the unemployed. States are already struggling under declining tax revenues and exploding Medicaid roles could quickly lead to cuts.

In fact, New York Governor David Patterson last week proposed a list of cuts to close a $1.5 billion budget deficit. Education aid and health care get the steepest cuts under the governor's plan since they make up the largest proportion of spending.

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