If you recently lost your job or are worried that you or a loved one might be laid off, chances are that you also are worried about losing health insurance. And for good reason.
Most alternatives to employer-provided insurance are shockingly expensive. Employers typically cover as much as 85% of workers’ premiums. Shopping for individual insurance also can be difficult and time-consuming.
Important: No matter how financially challenging, staying insured must be a top priority. Uninsured people are less likely to receive preventive care and services for major illnesses. The result is that an estimated 22,000 uninsured Americans between the ages of 25 and 64 die prematurely each year because they lack access to health care.
What you need to know about getting health insurance…
The federal stimulus plan that recently was signed into law provides some relief for laid-off workers. Under the plan, the government helps pay “COBRA” premiums. The Consolidated Omnibus Budget Reconciliation Act, the law passed in 1986 and known as COBRA, requires employers with 20 or more workers to make health insurance available to former employees for up to 18 months after leaving their jobs — regardless of whether the employee is laid off or leaves the job voluntarily. Formerly, workers had to pay the full cost of the insurance — and the premiums are expensive. Family coverage under COBRA easily can cost more than $1,000 a month.
Bonus: While you are insured under COBRA, any preexisting condition is covered.
Now, because of the stimulus package, if you lost your job on or after September 1, 2008 (or lose it before January 1, 2010), you have to pay only 35% of the premium for nine months beginning on March 1, 2009, when the subsidy went into effect. If your adjusted gross income (AGI) for that tax year is no more than $250,000 ($125,000 for individuals), the subsidy is not taxed. If your AGI is more than $125,000 (single) or $250,000 (family), you may need to repay some or all of the subsidy when you pay your income tax.
The subsidy applies to anyone who lost his/her job involuntarily. Your employer will contact you about COBRA if you were laid off during those dates even if you did not take COBRA at that time. If you lost your job because your company went out of business, you are entitled to a COBRA subsidy only if there is a health insurance plan in place.
Those who are entitled to the subsidy and paid COBRA premiums in full after March 1 will receive a rebate or credit for the months that they paid for. You are not eligible for the subsidy if you have access to your spouse’s health insurance or Medicare.
Caution: The subsidy lasts for only nine months of the 18-month COBRA coverage. After that, you must pay full premiums again.
For additional information on the COBRA subsidy, contact the US Department of Labor (866-444-3272, www.dol.gov/ebsa/cobra.html).
Research your company’s options. Under the previous COBRA rules, you had to stick with the plan in which you were enrolled at the time you left your job. Now you can see if there is a less expensive option that still will work for you and your family. If your former (or soon-to-be former) employer provides COBRA coverage, you’ll need information about all the company’s health insurance options. The new rules allow employers to let former employees choose from all available health-plan options.
If you worked at a company that had fewer than 20 employees, look into “Mini-COBRA.” Forty states offer state continuation plans that allow you to stay in your group plan. Some states may subsidize the cost. The same COBRA subsidy rules apply. To see whether your state offers Mini-COBRA, visit the Web site of the state’s insurance department. Go to the National Association of Insurance Commissioners’ Web site (www.naic.org) to link to your state’s insurance department.
If you aren’t eligible for COBRA or you still need individual health insurance after an 18-month COBRA period, you may need to shop for reasonably affordable private insurance. This is challenging but by no means impossible. A good place to start is at a comparison-shopping Web site, such as www.ehealthinsurance.com, which lists more than 10,000 insurance products. Also ask friends and family for trusted health insurance agents who can help you through this process. For information, go to www.naic.org.
Wise move: Individual plans often are prohibitively expensive. You may be better off if you can join a group — a trade association, an alumni association or the local chamber of commerce perhaps — to piggyback on the traditional group plans that they often offer.
If you are healthy… consider getting a high-deductible health insurance policy that is linked to a health savings account (HSA). Some of these policies charge low premiums. Although annual insurance deductibles are high — for example, $5,000 for a family of four — premiums are just $398 a month. To pay for the out-of-pocket costs (including the deductibles), you are allowed, by law, to set aside up to $3,000 ($5,950 for couples filing jointly) in a tax-free HSA. You can add $1,000 more if you are at least 55 years old. Any money that you have left in the account can be rolled over from year to year.
If you have children… some states will allow you to keep yourself and your spouse on COBRA or another policy and enroll your children in the federally financed Children’s Health Insurance Program (CHIP). In February, the government enacted the Children’s Health Insurance Program Reauthorization Act (CHIPRA), which makes it easier for uninsured children from families with higher incomes to get coverage. Example: If you live in New York State and your yearly household income is $88,200 or less (for a family of four), your children would qualify for CHIP (called “Child Health Plus” in New York State), which costs no more than $40 a month per child. To get information on CHIP, visit www.insurekidsnow.gov.
If your income is low… you may qualify for government-sponsored health insurance or health-care services if all of your household income is coming from unemployment insurance… you are a single parent… or you lost your job because your company moved out of the country. To find out if you qualify for the Health Coverage Tax Credit (HCTC), which will pay a portion of your health insurance premium, go to www.irs.gov and type “HCTC” in the search box.
If you have a preexisting condition… you must make sure that you continue coverage. If you had no insurance coverage for 63 days or more, insurers can take your health into account when deciding whether to offer you coverage. Something as simple as being overweight or being treated for a minor back sprain could be a reason you’ll be denied.
Federal law mandates that if you are ill, there must be an insurance option that can’t turn you down. In many cases, this is insurance for people who are considered high risk — there is a good chance that they will need to file expensive claims. There are no regulations on how much insurers can charge for this coverage, so premiums can be extremely expensive. For more information on health insurance options in your state, visit the Web site of the state’s insurance department.
Coming soon: What everyone needs to know now about unemployment insurance.
