After a Layoff
Critical Health Benefits and Financial Decisions
RELATED CONTENT
- U.S. Census Bureau, Health Insurance Data:
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- Harvard School of Public Health:
- Harvard School of Public Health
- U.S. Department of Labor, Health Plans & Benefits:
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- MedlinePlus, Health Insurance:
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Continuing Your Coverage
First, understand when your employee coverage ends. If you are offered or can negotiate a severance package, make sure to ask if your health benefits continue during the severance period.
You do have a number of options for securing health benefits when your employer coverage does end. This includes COBRA continuation of coverage, an individual health insurance plan or, depending on your financial situation, free or low-cost health insurance programs like Medicaid or the State Children’s Health Insurance Program (SCHIP).
COBRA
Depending on your employer, you may have the right to continue health coverage under certain conditions. Health continuation rules enacted under COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1985) apply to dislocated workers and their families, even those whose work hours have been reduced, causing them to lose eligibility for health insurance.
To be eligible for COBRA coverage, you must have been enrolled in your employer's health plan when you worked and the health plan must continue to be in effect for active employees. If you are eligible, you should receive a COBRA notice from your employer. Read this carefully. In order to continue coverage you must sign up for COBRA within a specified time, typically 60 days from your eligibility date.
While most employers must extend your health benefits for 18 months under COBRA, the sticker price for this insurance might be a shock. The typical cost is 102 percent of the premium, which includes the actual cost to your employer, not just the amount you have deducted from your pay. Paying double or more is not unheard of to keep the same coverage. Visit the U.S. Department of Labor's website for more information on COBRA.
Recent COBRA Changes
As part of the national economic stimulus package, people who were laid off (or may lose their jobs in the near future) and who select COBRA coverage will receive help paying for it. With the rising unemployment rate, these changes are a positive temporary solution and will make COBRA coverage more affordable for eligible consumers. There are several important details to know about the recent changes to COBRA coverage:
- People who were laid off (or lose their jobs) between September 1, 2008 and December 31, 2009 are eligible for a subsidy to help them pay for COBRA coverage.
- These individuals will receive a 65 percent subsidy. This means they will have to pay 35 percent of the usual cost of COBRA.
- This option is available for a maximum of nine months. After that, consumers still receiving COBRA coverage will go back to paying the full premium.
- In most cases, the earliest effective date for the subsidy is March 1, 2009.
- Employers are in the process of notifying eligible individuals about this subsidy. Once a person is notified that they are eligible for this subsidy, they have 60 days to select COBRA coverage.
- Individuals who were laid off before the stimulus package was passed will have a 60-day “special election period” where they will have another opportunity to select COBRA coverage.
Click here to learn more about these recent COBRA changes.
Individual Coverage
Individual health insurance is another good option for many Americans. These plans come in all shapes and sizes — you can purchase comprehensive coverage that may look very similar to what was offered through your previous employer, or choose a lower level of coverage for a lower price. Depending on your situation, and the plan that you choose, individual health insurance may be even more affordable than COBRA.
Depending on where you live, you may need to fill out a health questionnaire. Your health history can impact your eligibility for the plan, as well as the cost. This process is called "medical underwriting." A study conducted in 2007 found that about 89 percent of those who apply for individual health insurance, and undergo medical underwriting, were eligible for plans.
It's definitely worth taking the time to research individual health plans in your area to see what is available to you and your family. You can start your search by visiting eHealthInsurance.com and getting a quote for an individual insurance plan.
Free or Low-Cost Programs
Depending on your financial situation, you and your family may be eligible for free or low-cost health insurance through publicly available programs such as Medicaid and SCHIP. Many Americans are unaware of these programs, or unsure of who is eligible or how to enroll. In fact, 11 million Americans who are eligible for these programs are currently uninsured.
Medicaid is the main resource for health insurance for the uninsured in the United States. It provides health insurance to individuals who meet certain financial criteria. Each state has its own Medicaid program, all with different benefits packages and eligibility requirements.
SCHIP provides health insurance to children who live in families that make too much money to quality for Medicaid, but cannot afford health insurance on their own. As with Medicaid, each state has its own SCHIP program with its own benefits package and eligibility requirements.
To learn more about these programs, and access state-by-state contact information, visit Insure Your Health here.
Other Tips
Here are a few additional tips to keep in mind as you consider how best to manage your health care needs in the wake of a job loss:
- Try to get a better rate for yourself during the 60 days you are allotted to sign up for COBRA by calling your employer for more information.
- Under COBRA, if you are sick or injured within two months of losing your insurance benefits with your former employer, you have the right to pay premiums retroactively for those two months in order to remain insured.
- Check whether you can be covered under your spouse's plan.
- See if an association or club you belong to offers health insurance to its members.
And, a few tips to help manage your finances:
- Prepare a written budget to help clarify your cash-flow situation.
- Get rid of debt! Extra debt beyond the home mortgage and car payments can be a burden if you are laid off, especially high-interest credit card debt. Pay off as much debt as possible while you still have a job.
- Build a cash reserve. Ideally, you already have an emergency fund in place for just this sort of possibility, preferably with at least three to six months of cash to cover bare-bones expenses. If you don't have such a fund, or it's not well funded, put cash in it now while you can afford to.
- Cut expenses to free up cash to pay off that extra debt, feed the emergency fund and test run a bare-bones budget in the event you are laid off. Look at what expenses you could do without or reduce if you were to become unemployed, such as entertainment, clothing and meals out.
