Holding on to Your Health Care

How to keep your health care coverage even if you're unemployed.

March 18, 2009 — -- An estimated 4 million Americans have lost their health insurance coverage during the recession, according to the Center for American Progress Action Fund, a Washington, D.C., think tank. But the economic crisis doesn't have to turn into a health care crisis for your family.

"Good Morning America's" financial contributor Mellody Hobson offers tips and advice that will help the employed and unemployed hold on to their medical coverage.

Health Care Tips for the Employed

If you haven't been laid off yet, the first thing to do is get a physical through your employer's plan. Have everyone in the family get one, if they're covered for it. Many companies will cover all the costs as part of their wellness programs, which will come in handy if you later find yourself looking for your own insurance.

Next, if your spouse has health insurance at his or her job, see if you can join their plan. You may think it's too late to do so after the usual election period, but that's not always the case. Losing your coverage is considered a "qualifying event," assuming a layoff is imminent, akin to an exception to the rules. Jump on this, because some health plans have a time limit for you to take advantage of that loophole, usually between one and two months after you've lost your coverage.

Health Care Tips for the Unemployed

Most of us have heard of COBRA insurance, which extends the coverage your employer used to provide after you've left your job. Generally speaking, if your employer has more than 20 employees, it is required to offer it to you for at least 18 months. You'll pay the premium.

You have 60 days to decide whether to opt for a COBRA plan, and I advise you to take that time. If you find a new job with health insurance, then you've saved yourself two months of a costly premium.

Here's something many people don't know: If the worst happens and you need coverage during those two months, you can restart your old plan as long as you pay the premium.

The premium can be very costly, especially when you're out of work.

Help From the Stimulus Plan

But there is good news on that front, thanks to a provision in the new stimulus plan to help workers who are laid off between Sept. 1, 2008, and Dec. 31, 2009. COBRA premiums will now be subsidized by 65 percent for the first nine months of coverage — which means that the cost for individuals will go from $390 per month to $140 — a savings of $250 a month, and from $1,280 for a family each month to $450 — a savings of $830. That's a lot of money to keep in your pocket when your income has dropped.

Employers are required by law to send a notice no later than April 17, 2009, to everyone who is eligible. Then you'll have 60 days to opt into the program. The starting date for these options is Feb. 18, which is when the bill was passed. There's no rebate for the premiums you've already paid but your future premiums will be automatically adjusted.

If You Work for a Small Business

For small-business employees, 40 states offer what is known as mini-COBRA plans. These plans are similar to the regular plans, but their details vary by state. For example, in my home state of Illinois, mini-COBRA can last for 36 months, while in Georgia, it only lasts for three months. You can research your own state's mini-COBRA rules at statehealthfacts.org.

When COBRA Runs Out

I cannot stress this enough: Under no circumstances should you go uninsured, even if you're healthy. The No. 1 cause of bankruptcy is illness and medical bills. Unforeseen events — from a car accident to appendicitis — can cost between $11,000 and $15,000. It's just not worth the risk.

What you could do if you're healthy and have no pre-existing conditions is buy an individual insurance plan straight from an insurance provider. According to Forrester research, the average monthly premium for an individual under these programs is $158 and $366 for a family.

These rates will vary greatly depending on coverage level and deductibles for each plan. A good place to compare plans is at cobralearning.com.

Don't Forget Professional Organizations

The Web site has a COBRA subsidy calculator, which allows you to see what your COBRA cost will be, and it will also show you comparable individual plans. The important thing to remember with these plans is that you can be rejected, so carefully consider your options before declining COBRA.

Another tip: Many professional organizations have deals on health insurance. Check those sites out for discounts as well.

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