The scariest part of losing your job can be losing your health insurance.
Group health insurance through an employer is easily the most desirable form of coverage. It’s cheaper, usually more comprehensive and far more generous than individual policies.
But when you’re laid off, what do you do? The options, at first glance, appear to be pricey for most families. However, bypassing insurance can be even more costly. What's more, a few techniques can shave your premiums down so you remain covered and can still save some money while you look for your next job.
Consider these options:
One solution may be to get married. In a survey by the Kaiser Family Foundation last April, 7% of respondents said they tied the knot mainly so they or their spouse could access the other’s employer-sponsored health insurance.
Even if you’re commitment-phobic you may have options here. Consider registering with your state as a cohabitant to get on your domestic partner’s insurance plan. It is up to each employer to determine if you will be covered. However, it is not unusual for some larger companies to offer health benefits to domestic partners or those with cohabitation agreements, says Kathryn Wilbur, senior counsel of health policy at the American Benefits Council. Another caveat to note, though: Wilbur says some companies only offer benefits to non-married couples who can’t legally marry, such as same-sex couples in most states. That means if you are able to marry, but choose not to, you may not be eligible under the employer’s plan.
If cohabitation doesn’t work for you, the individual health insurance market is another option. Be aware this option can be expensive, and many insurers may drop coverage based on preexisting conditions, says Cheryl Fish-Parcham, deputy director of health policy at Families USA, a nonprofit advocacy group. “You might be surprised to find out that the Internet rate is not what you would be charged,” she says.
A June report by Families USA found that 35 states did not limit insurance premiums based on health status, and that 21 states allowed insurers to exclude coverage for more than a year for pre-existing conditions. Check with your state insurance commissioner's office if you are interested in obtaining individual coverage. Some state programs have income limits, while others, such as Connecticut, provide subsidies up to a certain income but also make plans available to individuals above the income threshold.
Many will opt for COBRA, a federally mandated system under which employees continue to receive health benefits up to 18 months after being let go.
COBRA isn’t for everybody. Only those who have worked at a company with 20 or more full-time employees are eligible. And premiums aren’t cheap, costing 102% of the total premium—in other words; you will end up paying the hundreds of dollars that would have been mostly subsidized by an employer. Keep in mind that domestic partners or cohabitants are not covered by COBRA.
There are ways to reduce COBRA costs. If you convince the Department of Labor that your job was eliminated and shipped overseas, you could get a hefty health coverage tax credit, says Fish-Parcham. Unions at manufacturers and other companies usually fight to do this, but any three employees can join an attempt to get certified for the tax credit.
If you are declared eligible for the health coverage tax credit, you could be reimbursed as much as 65% of the COBRA premium. And although the payments can take as long two to three months after petitioning the Department of Labor, Fish-Parcham says you can have the government make the credit retroactive to when you started COBRA coverage.