(CBS) When people lose their jobs, they also lose their health insurance. Finding alternative insurance can be intimidating, and expensive. But in this column, Early Show financial adviser Ray Martin goes through some of the available options.
For starters, he says, do NOT go without insurance, assuming it's going to be prohibitively expensive. The No. 1 reason individuals file for bankruptcy is medical bills that can't be paid thanks to a lack of insurance. But, he stresses, you do have some choices.
According to recent statistics, about 46 million Americans are going without health insurance coverage. With the souring economy and rising unemployment, the number of folks losing job-related health insurance benefits is set to rise significantly. And with more folks looking for jobs, finding a job will take longer, which means more displaced workers can go without health insurance for longer periods of time.
Unfortunately, there is no universal health insurance plan for folks who need temporary health insurance coverage due to loss of coverage when they are between jobs or no longer qualify as a dependent under a spouses or parents plan. However, many insurance companies are developing more individual and "gap" plans in an effort to make some options more affordable to individuals, due to a growing market demand. Sorting through the available options and finding affordable short-term health insurance can be challenging, but it's not impossible.
Here's what to look for:
COBRA Continuation of Coverage
Under a Federal law called COBRA (Consolidated Omnibus Budget Reconciliation Act), displaced workers are provided the right to continue coverage under their employers' group plans after they change or lose jobs. Continuation of coverage can also apply to children who no longer qualify as covered dependents because they are no longer full-time students. This option is available to employees of companies with group health plans that cover 20 or more workers. Some employers with other health plans (such as self-insured plans) may not be required to provide COBRA continuation coverage. The cost of health coverage under COBRA for displaced workers is usually more expensive than health coverage for active employees, since, usually, the employer pays a part of the premium for active employees, while displaced workers are required to pay the entire premium themselves. Since it is the full cost for the coverage, it can be expensive: On average, the monthly premium for an individual policy in 2008 was $392, and for a family plan, about $1,056 a month, according to a recent Kaiser/HRET survey. But typically, that is still less expensive than individual health coverage with the same features and benefits.
Coverage under COBRA can be continued for up to 18 months, and up to 36 months when loss of coverage is due to divorce, disability, etc. When electing COBRA coverage, you must be sure to do so within 60 days of your “qualifying event” (such as loss of your job, divorce, etc.); after that time, the insurance company can decline your eligibility. Once you select COBRA, your coverage is effective with no gaps, so your eligible medical claims during that period of time should all be covered. Because this is the same coverage that the worker had before losing his or her job, the same benefits and features are available, and there are typically no restrictions for preexisting conditions. You can also discontinue participating at any time after permanent coverage is found.
But continuation of health insurance under COBRA is not always available for workers of companies that go out of business: When a company shuts its doors and also terminates its health insurance plan, usually there is no COBRA coverage available. If, however, there is another plan offered by the company, you may be covered under that plan.
Short-Term Medical Insurance
Short-term medical insurance can provide coverage for a limited period of time, and may be a good solution for those between jobs or waiting for other health insurance to start. This form of coverage is offered by a select group of insurance companies and features coverage from one-to-12 months. This can be a good option for those between jobs, when COBRA is not available and you do not have significant pre-existing conditions. For example, the Celtic Insurance Company offers a short-term medical plan for a 45 year-old male that can cost as little as $74 a month. Of course, the cost of this coverage will depend on your age, other health related factors, and the deductible you select (some products feature a selection of deductibles from $250 to $2,500). After the deductible is paid, covered individuals typically pay 20 percent of covered expenses up to an out-of-pocket limit, and then all covered expenses are covered 100 percent up to $2 million. Another provider that offers short-term medical insurance is Golden Rule (a UnitedHealthOne Company). Also, check out www.ehealthcobra.com, a Web site developed by eHealthInsurance that offers quotes and side-by-side comparisons of several short-term and high-deductible medical plans for individuals and families.
Catastrophic Health Insurance
As the name implies, these policies are primarily designed to cover major emergency medical expenses. The cost is relatively low, because insured people must first satisfy a high deductible, ranging from $500 up to $15,000, depending on the plan purchased. These policies are not intended to pay for routine doctor office visits or trips to the emergency room for the flu, nor for preventative care, maternity care or mental health care. However, most catastrophic plans cover hospital stays, X-rays, and surgical expenses. Think of this as affordable medical coverage for the worst that can happen, which primarily provides coverage so your other assets do not get wiped out from the high cost of a true medical emergency. Folks who get this coverage will need to be prepared to pay a deductible if they incur a serious illness or accident. If you have a pre-existing condition such as heart disease, cancer or diabetes, you are generally not eligible for this type of coverage. There are several Web sites that will compare catastrophic plans in your area and provide quotes for you, including gohealthinsurance.com and medhealthinsurance.com.
Association Coverage
Many trade, professional or other associations offer health insurance to their members. If you belong to any groups or associations, call their membership services to find out if they offer this coverage. There can occasionally be a small, additional administrative fee such as two percent of the annual premium that the Association may charge you, but this is still a good way to obtain a group rate for coverage.
Non-Group Coverage
Many health insurance companies offer individual health insurance coverage. This can be very expensive and may not available in your state. Often, application requirements will apply, and preexisting conditions will be excluded from covered health and medical conditions. Some states mandate a “high-risk pool” that guarantees by law that they accept those who apply, under certain conditions. Check with your state's insurance department for more information.
Local Clinics
Some uninsured adults turn to local clinics for low-cost or free medical care for things such as routine visits or check-ups. But this is not a viable alternative for a major illness or accident, as hospitalization is not provided. If you decide to forgo health insurance, it does not mean that you can't still seek care from your family physician or local doctors; you will just need to pay as you go. And don't be afraid to negotiate those fees. This is a much more affordable way to seek care then going to an emergency room, where the cost can be more than 10 times higher.
Medicaid
This is a joint federal-state health insurance program for individuals who meet near poverty-level income and asset qualifications. States usually provide Medicaid for individuals who receive federally-funded cash assistance payments, such as SSI. The set poverty-levels can vary by state so, for more information about Medicaid, contact your state's Medicaid agency, social service or welfare office.
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