Stay Covered After a Layoff

Most people are hit with a double whammy when they're laid off: Not only do they lose their income, but they also lose their employer-subsidized health insurance. The federal law called COBRA lets most people continue coverage with their employer's plan for up to 18 months after they lose or leave a job. And you can't be denied coverage or charged a higher premium if your health is poor or you have a preexisting condition.

But the cost may flabbergast you. Employers generally pay about three-fourths of the cost of family health coverage for their workers; if you lose your job, you have to pay the full premium -- which averages $12,680 per year, according to the Kaiser Family Foundation. In fact, a survey by the consumer-health organization Families USA found that the average COBRA premium for family coverage consumes about 84% of the average unemployment benefit.

Fortunately, COBRA will cost less thanks to the stimulus package. The final version included a federal-government subsidy to pay 65% of the cost of the COBRA premium for up to nine months after you lose your job.

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One other COBRA shortcoming is that it may not be available at companies with fewer than 20 employees (although some states have their own laws requiring smaller firms to provide coverage). And COBRA coverage stops if your employer terminates the company's health-insurance plan entirely.

Other options. You may find a better deal if you're healthy and live in a state with a competitive health-insurance marketplace. That includes most states, but excludes New York and New Jersey, which require insurers to guarantee coverage to everyone and charge the same rate.

You can get price quotes and compare policy details at eHealth-Insurance.com, or find a local health-insurance agent through the National Association of Health Underwriters.

You can lower the cost of individual health insurance by increasing your deductible. And if your deductible is at least $1,150 for individual coverage or $2,300 for a family plan in 2009, you may qualify for a health savings accountQand contribute tax-deductible money that you may use tax-free for medical expenses in any year.

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 out-of-pocket costs, and look for a policy that has a total coverage maximum of at least $1 million.

If you have health problems, don't reject COBRA before you know for sure whether a private insurer will cover you. If COBRA is not available, you may be able to sign up for your spouse's plan, even if it isn't open-enrollment season.

Or you may have other coverage options. Most states have high-risk pools that cover people who have been rejected by private insurers, or they require insurers to provide some form of continued insurance for those who recently lost employer coverage. The rules vary by state (for links to state insurance departments, visit the Insurance Center). You can also find information about health-insurance programs for people with low incomes or medical conditions through CoverageForAll.org.