Health Coverage While Unemployed
by Tony Novak
A key decision that millions of Americans face each year is whether to elect "COBRA" “HIPAA” or “COBRA alternative” health care continuation coverage when they lose employer-provided health coverage. About two thirds of all Americans are covered by employer-provided health coverage but with the recent increase in layoffs across the country, the number of workers losing these employer-provided health benefits is at a record level. Workers typically have three or more options available and the cost can vary dramatically between the various choices available. Some may opt to take no health insurance coverage and bear the financial risk themselves. In order to make the best decision, they need to know about two laws, COBRA and HIPAA.
COBRA Employers who have over 20 employees and offer group health coverage are required to offer continued coverage to their workers, former workers or dependents who lose eligibility for the group health plan. This benefit does not apply if the health plan withdrawals coverage or if the employer terminates the group health plan before the worker is enrolled under the COBRA benefit. When workers lose health insurance coverage, COBRA is usually not the best solution unless the employee or a dependent is in the middle of a course of medical treatment because this is the most expensive health coverage option. But in some cases, for example, if a worker has serious medical conditions or the worker’s spouse is pregnant, COBRA coverage may be desirable.
HIPAA Most group health plans offer members the right to convert to a variety of individual plans while preserving continuation of coverage benefit. In many cases you may also change to another insurance plan in your local market by providing evidence that you were covered by a prior health plan. For “preferred risk” applicants, changing insurance plans can result in significant savings, but this will generally will not be an appealing option for those with significant pre-existing conditions.
COBRA ALTERNATIVES For the majority of healthy workers who just want to be protected from unforeseen medical expense until they land another job, short term medical coverage is the best answer. This coverage is issued online within minutes, covers all ordinary any necessary medical treatment from any medical provider in the United States and requires no referrals. The cost of this coverage is less than 1/2 of the price of COBRA plans. The two downsides are that this coverage does not cover pre-existing conditions and you must re-enroll after 6 months.
ELECTING NO COVERAGE Individuals in some states may wisely elect to keep no health coverage while unemployed with the knowledge that they can join a health plan at any time, even after they are receiving medical treatments, and have all of their medical expenses for pre-existing medical conditions covered by the new plan. Three of these states are New Jersey, New York and Vermont. The negative is that this type of health coverage, if needed, is ridiculously expensive. Some plans in these states run more than $2000 per month for family coverage.
RESOURCES IRS Notice 98-12 provides this information in the form of questions and answers. The IRS publication on this subject can be found at https://www.irs.gov/pub/irs-drop/n-98-12.pdf
About the author:
Tony Novak, MBA, MT is a writer and financial adviser in Narberth, PA. His businesses MedSave.com and reedom Benefits Association provide onine benefits enrollment and planning advice to individuals and businesses in 47 states. Www.MedSave.com offers online enrollment for short term medical insurance nationwide and professional enrollment support by telephone at (877)-529-7435.
