Options if health insurance is lost

The Baltimore Sun

Losing your paycheck isn't the only problem when you're laid off. You probably need to decide what to do about health insurance if your employer has been providing your coverage.

The temptation might be to go without it to save money, hoping nothing befalls you before you find a new job with insurance. That would be a mistake. Even the young and healthy can suffer broken bones playing sports or through a car accident and rack up steep medical bills.

So what other choices are there? When you lose a job, you have certain insurance rights under federal and state laws. A rundown on state-by-state laws can be found at www.health insuranceinfo.net.

Here are some options:

*Spouse's benefits: Do you have a spouse who has insurance at work? If so, you can under federal law enroll in your spouse's plan even if it's not open enrollment time. You have up to 30 days to enroll if you left your job voluntarily, up to six months in Maryland if you were laid off.

This might be your best option. Employer plans tend to offer more generous benefits than individual policies and the employer usually picks up a big part of the tab. Plus, there's no medical underwriting in group plans, so any health problems you might have won't prevent you from joining, says Brenda Wilson, chief of health insurance and managed care at the Maryland Insurance Administration.

*COBRA: This is the federal law (Consolidated Omnibus Budget Reconciliation Act) that says you must be allowed to continue coverage under your former employer's plan for up to 18 months after leaving the job. It applies to companies with 20 or more workers. You won't qualify, though, if you were fired for "gross misconduct."

COBRA is the easiest option and one that most people choose. If you can't join a spouse's plan, COBRA also is your best bet if you have health problems that might make it difficult or impossible for you to buy a policy on your own. But coverage under COBRA isn't cheap. You will pay the full cost of premiums and may be charged an administrative fee.

*Mini-COBRA: States also require coverage for some who fall through the federal law cracks. These state protections are sometimes called mini-COBRA.

Maryland, for instance, lets former workers stay on an employer's plan up to 18 months even if there are fewer than 20 workers. In this case, too, you shoulder the entire cost.

There are exceptions. This law applies only to insurance contracts written in Maryland. So, you wouldn't be able to continue under the plan if you worked for a Maryland subsidiary of, say, an Ohio company that bought insurance issued in Ohio for workers.

Also, the law doesn't apply to plans where the employer pays the claims itself. Check with your employer to find out what kind of plan you have.

*Individual conversion policy: In some states, including Maryland, you are entitled to buy a policy from the insurer providing your former employer's plan regardless of your health. Benefits under these conversion policies are typically stingier than what you had before and the premiums are higher, Wilson says.

"It really wouldn't be a good option if you have other options," she says.

*Individual insurance policy: If coverage through COBRA is too rich for you, don't assume you can't afford insurance and must go without it. You might find cheaper coverage by buying an individual policy for yourself and family.

Insurers will ask questions about your health to determine whether to sell you a policy, at what cost and what coverage might be excluded.

Once you qualify for a policy, it can't be canceled unless you drop coverage or reach the policy's lifetime benefit cap, which often runs $3 million to $5 million, says Sam Gibbs, senior vice president of eHealth, which owns online broker eHealthInsurance.

Gibbs says the price difference between COBRA and an individual policy can be significant. Last year, the average policy cost $148 a month for a single person, compared with $227 under COBRA in Maryland. A policy for a family averaged $344 a month, compared with $656 under COBRA.

COBRA premiums tend to be higher because employer plans have rich benefits, Gibbs says. To keep costs down, "only buy the coverage you need," he advises. A healthy 22-year-old male, for instance, can go without maternity benefits or prescription drug coverage, he says.

(You won't be able to opt out of benefits required by your state. Maryland requires that policies cover procedures such as prostate cancer screening and hospitalization for childbirth.)

When shopping, look at two or three insurers and then at two or three policies within each of them, Gibbs says.

Rob Snow of Bethesda shopped online. The 41-year-old left his job two years ago to launch his own consulting firm. He kept his coverage under COBRA, paying $1,038 a month for his healthy family of five.

But as the 18-month deadline neared, Snow searched online until he found a policy for $603 a month.

He says the benefits are similar to what he had before, except there's no dental coverage. The family's doctors are the same.

"I wish I had done it sooner," he says. "By the time I got around to it, I saved $400 for one month."

If you know you will need a policy for only a few months, consider a short-term policy instead. Frequently, they last six months and can only be renewed once, Gibbs says. Premiums tend to be cheaper than a longer-term policy.

A short-term policy works if you are assured of starting a job before the insurance runs out, Wilson says. "If you get sick and the next job doesn't come through, you can really be up a creek," she says.

*When COBRA ends: If it takes you well over a year to find a job, you still have some insurance protections once COBRA coverage is exhausted. In Maryland, you will be eligible to enroll in the Maryland Health Insurance Plan. (This is also the insurance of last resort for Marylanders who have been denied coverage because of poor health.)

The premiums are higher than the standard market rate, but "it's still a very good rate," Wilson says.

Apply a month before COBRA ends to assure that there is no lapse in coverage, she advises.


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