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.
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 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.