Once the income’s gone: health insurance options after a layoff

by Elena Skoura, Graduate Intern, bWell-informed

“My husband's just lost his job and with it our health care benefits.”

In challenging times like these, quotes like the above are becoming increasingly common. But even if they’re not unusual, each and everyone hide a personal or family drama for those who find themselves out of work. One of the biggest causes of drama after a job loss is the uncertainty of losing health care coverage for the employee and his/her family.

The decisions that the newly unemployed must face are not easy emotionally or financially. Those lucky enough to have a coverage option through a family member or spouse still have to act quickly—the terminated employee must apply for insurance through their family member’s insurance within a month of losing the old coverage or the option may no longer be available.

Less frequently, unemployed individuals may find insurance through a trade group or even their church. But such alternatives are usually much more expensive, even though the coverage may be substantially less. Individual policies usually do not include coverage for pre-existing conditions.

The most attractive alternative for many recently laid-off workers is often COBRA. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, a policy that extends the same group health benefits to former employees for up to 18 months after a layoff. Businesses with over 20 employees must offer a COBRA option; for smaller businesses, state laws may provide similar options.

To be eligible for COBRA, the individual must have been enrolled in the employer’s health plan, which must continue to be active for current employees. An unemployed individual can apply for COBRA once he or she has experienced a “qualifying event” resulting in the loss of health care coverage—including voluntary or involuntary termination of employment for reasons other than misconduct or reduction in the number of hours of employment.

If the individual needs to extend his 18-month COBRA coverage for a longer period of time, he must prove that he has become disabled within the first 60 days of COBRA and send the plan a letter from the Social Security confirming this fact.

COBRA can be a good alternative, especially for those undergoing a medical treatment. However, it can also be very expensive. While employed, the individual typically has to pay only a fraction of their health insurance premium costs, with the employer picking up the rest. Under COBRA, they must pay the entire premium, which can be hundreds per month for an individual, and even thousands for a family.

The options for health coverage after a layoff are few and unappealing. That is probably the main reason why, out of the 2 million people who lose their job every month, 90% average at least a month without any health coverage.

Even though the short term financial implications can be grave, the longer-term threat posed by the possibility of experiencing an expensive health complication when uninsured is worse. And the health implications from lack of health care may be the worst of all.

The bWell-informed Health Plan Forecaster has been designed to help individuals find affordable and appropriate health insurance coverage, whether they’re facing a job loss or simply do not have coverage available through their employer. Visit www.bwell-informed.com today for more information!