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Keeping Health Coverage After a Job Loss
A federal program lets you stay on your employer's insurance plan, but you might be able to find a better deal on your own.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
November 20, 2008
My company has been laying off people, and I'm worried that I may lose my job soon. If that happens, what will I be able to do about my health insurance?
If you lose or leave your job, you usually can continue coverage through your employer's plan for up to 18 months through a federal program called COBRA. You can't be rejected or charged more because of your health, but you may be flabbergasted by the price.
Your policy doesn't change when you make the switch, but the price jumps because you lose the employer subsidy. Employers generally pay about three-quarters of the cost of family health-insurance coverage. The average family plan costs $12,680 for the year, according to the Kaiser Family Foundation, but the average employee pays only $3,354 of the bill. If you get coverage through COBRA, however, you'll have to pay the full price yourself.
Employers generally subsidize single coverage even more, with the average policy costing $4,704 for the year but employees paying only $731. Lose your job and switch to COBRA, and you could be stuck with the full bill.
If you're healthy and live in a state with a competitive health-insurance marketplace, then you could find a much better deal elsewhere. The average premium for people who bought individual health-insurance policies from eHealthInsurance.com, a national health-insurance marketplace, was just $158 per month for individual coverage ($1,896 per year) and $366 for family policies ($4,392) in 2007, according to a recent study.
The study included a wide range of ages and policy designs -- about half the policies sold to individuals had a deductible of $2,000 or more. And in most states, the price will vary by age and health condition, with younger, healthier people paying a lot less.
You can get price quotes and compare policy details at eHealthInsurance.com, or you can find a local health-insurance agent through the National Association of Health Underwriters.
You can lower the cost of individual health insurance by increasing the deductible. And if your deductible is at least $1,100 for single coverage or $2,200 for a family plan in 2008, you can qualify for a health savings account, which lets you contribute tax-deductible money to an account that you can use tax-free for medical expenses in any year. For more information, see Health Savings Account Answers.
When comparing policies, look carefully at any exclusions or coverage limits. Some individual policies do not provide maternity coverage unless you buy an extra rider. Others limit coverage to a specific dollar amount on certain procedures or charge high co-payments. Compare premiums as well as potential out-of-pocket costs, and look for a policy that has a total coverage maximum of more than $1 million; otherwise, you could end up with tens of thousands of dollars in uncovered expenses if you have major medical bills.
If you have any health problems, COBRA could still be your best deal because you might get rejected for individual coverage or qualify only for a policy that excludes your condition. However, COBRA is not an option in some cases. It may not be available at companies with 20 or fewer employees (although some states have COBRA requirements for smaller companies). And COBRA coverage stops if your employer terminates its health-insurance plan entirely (see What If Your Employer Goes Broke? for more information).
If COBRA is not available, you may have other options for guaranteed-issue coverage, whether through a continuation policy or through a high-risk pool. The rules vary by state. Contact your state insurance department for more information. You can find links to your state insurance department at our insurance page and details about special programs for people with medical conditions or low incomes at CoverageForAll.org.
Reader Comments (1)
Posted by: julie at 11/19/2009 05:15:18 PM
In todays economy and job market we no longer have the guarantee that our employer will provide health insurance, or that our job will be around tomorrow. With premiums on the rise many have decided to go without health insurance. You may ask yourself how necessary is it for you and your family to obtain health insurance? We are here to help you answer this important question. How important is it to obtain health insurance? * Preventative Care: People who do not have health insurance are less likely to go to their physician for annual screenings and check-ups. This puts them at risk of not catching preventable diseases or early diagnosis. You may think, Im healthy, I dont need insurance. That may be true, but as we get older we need to be smart and have our annual check ups so we can remain healthy. * Financial Protection: Insurance is a protection from costly medical bills. The high costs of medical bills can damage your family financially. You may find yourself spending your nest egg or childrens college tuition on costly medical bills. We also need to remember that accidents happen and we have car insurance to protect ourselves financiallywhy would we not do the same for our health? * Medical costs without Health Insurance: Its true, paying for health insurance can feel costly, but not having it could actually do more damage to your wallet. You have to spend a day in the hospital. Average day in hospital $9,989 You break your arm. X-rays and care for arm $8,094 ...