What to do when you lose both your job and your health plan

Health insurance has become a hot button issue in US politics. With Washington making some progress in healthcare reform, this leaves Americans divided into three camps. Although estimates vary, it seems up to 50 million cannot afford private health insurance. The middle ground is help by those who do earn enough to pay for some private health coverage, and then there’s the comfortable group whose employers provide health coverage. Movement from one camp to another can be painful. It’s the difference between peace of mind and security on the one hand, and struggle and worry on the other. Because it can be a serious shock to a family to lose the health cover provided by an employer, Congress introduced the Consolidated Omnibus Budget Reconciliation Act (COBRA) in 1986. The name may not sound important, but the Act has proved a vital reform to allow families a bridge between employer-provided and private health coverage. Almost all businesses employing 20 or more must join the scheme and tell their employees of their rights.

COBRA is available to the majority of those who lose their employer-provided insurance, whether by termination, lay-off or voluntary termination. It can also apply when people lose hours and no longer qualify under a health plan, go through divorce or lose cover through the death of a spouse or parent. The umbrella of protection lasts for up to eighteen months in the ordinary case. Where a family member is disabled, the protection can extend to twenty-nine months. If the conditions are met, ex-employees are allowed to buy health coverage at group rates. This is more than the cost of the plan run by their employers (plus a 2% administration fee), but less than the cost of private coverage. The coverage runs from the date the employment terminates. If there’s a delay in putting the COBRA policy in place, the premiums have still to be paid as from the date employment terminated. This can sometimes be quite a large lump sum to find. The COBRA policy ends when the ex-employee or family member gets another health plan, no payments are made on the COBRA policy, or the period of protection ends. The advantage? While it’s in force, the insured and family get the same basic entitlements as under the employer’s plan.

The COBRA scheme has been working well in providing a subsidized breathing space during which people may find new employment with a health plan or with a rate of pay that can support private health cover. Unfortunately, with unemployment rising towards 10%, it’s growing increasingly difficult for people to find new employment. Thus, as savings run out, families are dropping out of the group COBRA coverage and into uninsured status. It’s a sad fact of life that if a family cannot afford a COBRA premium, it cannot afford a private health insurance policy. The best place to shop around for replacement cover is online. Term health insurance can be an economic way to fill the gap until full coverage can be restored. Hopefully, the economy will pick up and more jobs will come. As the economy revives, more will be able to find affordable health insurance online.