No job doesn't have to mean no insurance

by Lesley Politi on December 11, 2008

No job doesn’t have to mean no insurance

Laid-off workers are guaranteed an opportunity to obtain coverage, if they can afford it.
By Lisa Girion
December 7, 2008
If you lose your job, you should be able to maintain your health insurance coverage — but it will cost you.

The easiest and often the least expensive way to get health insurance if you are out of work is through a spouse. If your spouse has group benefits on the job, have him or her add you to that plan. Such group plans can’t exclude people with preexisting conditions, and they are less expensive than other options because the employer is picking up the lion’s share of the premium.

If that’s not an option, you may be able to get coverage under COBRA. The federal Consolidated Omnibus Budget Reconciliation Act requires employers of 20 or more people to extend coverage for 18 months to workers who lose their jobs. This is also available to people whose jobs are reduced to part-time status.

The catch is that you must pay for this coverage yourself at a time when you no longer have a paycheck coming in. And it’s not cheap. You must pay the entire premium, including the part your employer was paying, plus 2%.

“What I have found most difficult for folks to understand when they are faced with making a decision regarding whether to take COBRA coverage is that they have come to think that the cost of health insurance is the same as what their previous payroll deduction amount was,” said Sam Smith, an insurance broker in Hollywood who is a vice president with the California Assn. of Health Underwriters. “They are quite shocked when they see the actual premium the employer pays.

“In fact, it is more the rule than the exception that a terminated employee thinks that the COBRA premium is much more expensive than the premium the employer was paying,” he said. “They feel they are being penalized in some way.”

Monthly premiums for COBRA and Cal-COBRA coverage vary depending on age, type of plan (health maintenance organization or preferred provider organization) and the size of your former employer. For example, HMO coverage for a 25-year-old who had worked for a small employer would cost about $250 a month, while the premium for PPO coverage for a 55-year-old could exceed $1,000 a month. Larger employers are able to drive better bargains with insurers, so premiums for employees leaving those companies tend to be a bit less and may not vary by age.

COBRA coverage cannot be denied because of a preexisting condition, and it often has richer benefits than what individuals could buy on their own. But young and healthy consumers may find cheaper coverage with an individual policy.

The state Cal-COBRA law makes extended health coverage available to people who lose their jobs at small employers (19 or fewer workers). It also adds 18 months to the federal COBRA extension, so policy holders can keep coverage going for up to three years.

If you are unemployed after three years of COBRA, you still have options. Insurers are required to sell you individual coverage — regardless of preexisting conditions — under another federal law, the Health Insurance Portability and Accountability Act. You are eligible for this coverage if you had group coverage for 18 months or more and your COBRA coverage has run out.

Again, this coverage is not cheap. In fact, insurers can charge 170% of the market rate for a HIPAA policy. But if you’ve got preexisting conditions and no job-based coverage, it may be your only option. To be eligible for Cal-COBRA, you must apply within 62 days of losing your original COBRA coverage.

If you let your health coverage lapse for 62 days or more, your options are very limited. You may try to buy coverage in the individual market, but insurers can and do screen out consumers with preexisting conditions.

A last resort is California’s high-risk pool, known as the Major Risk Medical Insurance Program. The benefits are limited and are capped at $75,000 annually. Also, the premiums are higher — about 125% of individual market rates. Despite all this, the state’s high-risk pool often has a waiting list.

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