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Health Insurance for the Unemployed Posted: March 11th, 2010

By Maryalene LaPonsie

Maryalene LaPonsie

If you find yourself out of work, you may also find yourself out of health insurance. Here's how to continue health coverage for you and your family during times of unemployment.

Health Insurance Options for the Unemployed

Lay-offs mean a loss of income for workers, and often a loss of medical insurance. Approximately two-thirds of Americans receive their health insurance through an employer. If you have lost employment because of downsizing or outsourcing, you may quickly find yourself uninsured.

Fortunately, there are options available for today's unemployed workforce. Unemployment does not mean that you have to go without medical insurance.

Transfer to a Spouse's Group Health Insurance Plan

Perhaps the easiest way to maintain health coverage is to see whether group coverage is available through your spouse's employer.

A plan offered by an employer is likely to be far more affordable than an individual insurance policy that you buy on your own.

Group health insurance rates are cheaper because insurance companies can spread risk among a large pool of customers.

Another benefit of group plans is that you cannot be denied due to pre-existing condition. For those with chronic diseases or ongoing medical needs, this is critical. If you fall into this category, group coverage may be the only thing standing between you and an expensive high-risk pool health plan from your state.

Many employers have specific open-enrollment periods, and you may discover that you have to wait several months before you are able to be added to your spouse's health plan. To avoid a gap in coverage, consider one of the following options until you can be added to your spouse's group health plan.

Take Advantage of COBRA Health Insurance

If you work at a company with at least 20 employees, your employer is required to offer COBRA health insurance. Named for the Consolidated Omnibus Budget Reconciliation Act of 1985, this law requires employers to allow workers to maintain group health plan benefits for up to 18 months after employment is terminated.

Under COBRA, employers can charge you up to 102% of the actual premium cost (the full cost of your premium plus an administrative fee). If your former employer paid a portion of your health insurance premium, be prepared for some sticker shock when you see the amount of your monthly payment for COBRA health insurance.

Although COBRA may not always be the cheapest health insurance option, a federal subsidy has recently made this type of medical insurance more affordable. Under the American Recovery and Reinvestment Act of 2009 (ARRA), the federal government provides a COBRA premium subsidy to those who experience involuntary termination. If your lay-off occurred between Sept. 1, 2008 and March 31, 2010, the federal subsidy covers 65% of your COBRA health insurance premium. Your employer's human resources office should have information regarding your eligibility for the subsidy.

Investigate Individual Health Insurance

Individual health plans can be expensive but you shouldn't rule them out. If you are young and healthy, they could be even cheaper than some group plans. Even if you have some health issues that prevent you from receiving the best rates, you may be able to find affordable coverage by comparing premiums.

Some of the most affordable individual plans combine high deductibles with health savings accounts (HSA). A high deductible health plan (HDHP), sometimes called catastrophic insurance, typically has inexpensive premiums but does not pay for the first several thousand dollars of health care costs. An HSA can be used in combination with an HDHP, which allows you to pay for out-of-pocket expenses using tax-free money.

For those who rarely go to the doctor, high deductible plans can be a smart choice.

Consider Short-Term Health Insurance

For someone between jobs, short-term health insurance might be a good option to consider. As the name implies, short-term health insurance is intended for those who need basic coverage until they are able to find long-term health insurance coverage.

Short-term health insurance can be beneficial because premiums are usually cheaper than individual health insurance policies.

However, short-term health insurance generally does not cover preexisting conditions. Additionally, you may have a large deductible or limited coverage options. But for those who are between jobs and want to avoid gaps in coverage to ensure coverage of a pre-existing condition, short-term health insurance is a good bridge.

Look into a Major Medical Plan

If you need something a little more comprehensive than short-term health insurance, you should consider a major medical plan. These plans offer a greater range of services, as well as higher maximum pay-out limits.

Most major medical plans carry a deductible that must be satisfied before coverage kicks in. This means that you may have to pay for some expenses out-of-pocket. Still, this type of health insurance offers protection against high-cost medical services such as hospitalization, surgeries, and other major medical events.

Start a Business

Opportunities to start a business abound for those who are resourceful and motivated. Entrepreneurship can do more than help you find a new job -- it can also be your key to new health insurance.

Not only do many trade associations and Chambers of Commerce offer group health insurance opportunities as one of the perks of membership, but you may also be able to qualify as your own "group" for insurance purposes. There are about 12 states in the nation that allow you to be a "group of one" as a business owner.

Maryalene LaPonsie