Health Insurance for the Unemployed

Posted May 5, 2009 in Insurance Law by

About 4 years ago, I left the company where I’d worked most of my career and went to work as a freelancer. I was thrilled to be on my own, but I’ve missed some of the perks that come with working at a large business. Among them: Group health insurance.

After I left my employer, I opted to stay on their health-insurance plan for 18 months, which is the maximum allowed under the Consolidated Omnibus Reconciliation Act, or COBRA. At the time this seemed like a good decision, and the cost seemed relatively reasonable compared to what some people I knew were paying, so I didn’t immediately shop around. When my COBRA coverage was about to run out, I started to look into individual plans. I was unhappy to discover that I’d been overpaying for the 18 months I was on COBRA. If I’d moved to an individual plan much sooner, and I could have cut my premiums in half.

Whether you’re laid off or leave voluntarily, it can be overwhelming to move into the ranks of the unemployed or self-employed. There are a lot of issues you have to address, health care among them. Because insurance can be a sizeable monthly expense, it’s worth the effort to shop around and ensure you’re getting the most cost-effective plan that meets your needs.

COBRA allows people who have left their jobs (at companies with 20 or more employees) to remain on their former company’s health insurance plan for up to 18 months. Typically COBRA participants are required to pay up to 102% of the insurance premium, but under the recently passed stimulus bill, the government will pay 65% of COBRA premiums for the first 9 months if you lost your job between Sept. 1, 2008, and Dec. 31, 2009.

This government subsidy may make the difference between affordable and unaffordable health care for you and your family.

At the same time, however, you should talk to an insurance broker and get an idea of how much individual health insurance will cost.

There are a few types of health insurance plans to consider.

Fee-for-service or indemnity plans allow you to choose any medical provider for health care treatment. Following treatment, you pay the bill and then send a claim to your insurer for reimbursement.

Managed care plans provide both insurance and health-care services. Instead of paying every time a medical service is delivered, members pay a fixed monthly fee for health care, regardless of the amount of care needed.

Managed care programs also offer coverage for a variety of preventive services.

Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) are among the most common managed care plans.

HMOs generally require members to use their contracted physicians and facilities. Some HMOs have Point of Service (POS) options allowing members to use medical providers outside the plan’s network and still qualify for partial reimbursement.

PPOs generally encourage members to use the medical providers within the plan’s network. Members are allowed to consult with providers outside the network, but will have higher out-of-pocket costs.

Many individual plans will have a deductible that must first be satisfied before the insurer will pay for your medical bills. The higher deductible, the lower the premiums for the insurance plan. If you typically don’t have many medical expenses but could afford to pay a few thousand dollars if you became seriously ill, a high-deductible plan would probably make sense from a financial perspective.

If you are unable to purchase private health insurance–either because you can’t afford private health insurance or because pre-existing conditions make it difficult to obtain coverage–you should investigate whether you’re eligible for a state-funded or federally funded insurance plan.

Medicaid is a state-administered program that offers health insurance to low-income individuals. Eligibility rules vary from state-to-state, and in some instances children may be eligible for enrollment even if their parents are ineligible.

If you are unemployed and pregnant, you different rules may be used to assess your Medicaid eligibility. Because regular medical treatment during the course of a pregnancy is vital to the good health of both the mother and child, Medicaid has special rules that ease the eligibility requirements for pregnant women. If you attempted to enroll in Medicaid before becoming pregnant and were denied, you should still reapply for coverage while pregnant. If accepted, you’ll be covered for at least 60 days following delivery.

Depending on your state’s plan, your health insurance may be structured in a format that’s very similar to private health insurance plans. Very often, in fact, government-funded plans and private plans are run by the same insurance companies.

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