COBRA and Health Insurance

Unemployment causes obvious disruptions in one’s personal affairs. While continuation of health insurance benefits is understandably not top-of-mind during transition periods, there are important considerations for people who have found themselves unemployed and without health insurance coverage. There are risks to being without health insurance, both near-term in protecting against major medical expenses, but also longer-term in your ability to enter into a more permanent health insurance plan.

If you have historically received group health insurance benefits through your employers, you probably have not put much thought into your health insurance option.There are options for unemployed works to either 1) continue health coverage from the previous employer – albeit at one’s own expense, or 2) entering into a private-market individual health plan that ensures longer-term coverage and portability.

COBRA Options

There is a federal statute called COBRA that does guarantee your employee-based health insurance has a certain degree of portability. Under COBRA, by federal law you must be entitled to continue that health insurance coverage and pay for it on your own.

There are some restrictions on COBRA eligibility based on length of coverage and whether the dismissal from your full-time position meets certain criteria. For exact rules, please consult with the HR coordinator of your previous employer.

The limitations to you as a health insurance consumer is that while the law says that the company must continue to offer you the same level of coverage you had as an employee, there are not stipulations that preserve for you the same group rate offered to your former employer. Once the employers contribution is removed, newly-unemployed people may face “sticker shock” when they see what the cost is to continue their health insurance benefits through COBRA. However, the strongest case for continuing under COBRA is that it provides continuity in a period when many of your other affairs are in transition.

Other Health Insurance Options

Aside from finding a new employer providing health insurance benefits, there are more options available to you beyond COBRA, with the main options being: 1) Coverage under a Family Plan, 2) Short-Term Health Insurance and 3) Private-Market Health Insurance.
Coverage under a Family Plan

If you are married and your spouse has health insurance either through work or as a private health insurance policy, your first and best option is to see if you can be placed upon his or her health plan. The first consideration is whether you are eligible for coverage under a spouse’s health insurance plan. This is usually the most economical option with the greatest ease of entry. However, there are still limitations that may still apply. For example, if the family member’s health plan is through an employer, the adding new family members may be limited to only once a year during the group plan open enrollment period. You would need to consult with the benefits manager of the spouse’s plan to understand the full details of enrollment.
Short-Term Health Insurance

If you cannot find coverage under your spouse’s healthcare insurance plan, and you feel you will only be unemployed for a brief period of time before you find another job that offers medical benefits, you may consider a short-term insurance. Short-term health insurance is specifically designed to provide basic level, limited-term coverage to people who are in transition. Short-term health insurance plans provide basic level coverage with generally more affordable premiums than under a COBRA plan or a new individual/family health plan. Short-term plans involve a fixed period of time, usually 6 month to one year. The advantage of a short-term plan is that they are typically easy-to-understand, easy-to-enroll and affordable relative traditional health insurance premiums.

However, the downside is that short-term insurance plans do no cover the same variety of visits, tests, or procedures as would a COBRA or individual/family plan, and they have a set expiration date.

Private Market Health Insurance

While not a “short-term” solution, job-seekers may also consider enrolling in a more permanent Individual/Family plan. A growing number of Americans are opting for private-market Individual/Family plans to avoid having their health insurance benefits tied to their current or future employment.

Whatever health insurance you qualify for or choose to purchase, it is important that you have made arrangements to obtain some level of private health insurance before your COBRA benefit run out or if you choose not to enter under a COBRA plan.