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Financial Health
Can You Stay Insured After You Lose Your
Job?
by David Linney
Being terminated from a job is very traumatic.
It is even more traumatic when your job provides you with health and
prescription drug insurance that pays for most of the healthcare costs for
treating your (or a family member’s) bleeding disorder. When you lose your job,
what happens to your insurance? What are your options? How do you stay
insured?
Unfortunately in this country, the government
does not provide health and prescription drug insurance for all its citizens,
so it is important to know what legal rights you do have when
it comes to help with insurance after a job loss.
Introduction
When your employer makes the decision
to end your employment, the company should make you aware of the exact date when
your health insurance coverage will end as well as any options you may have to
continue your group health benefits. The employer group health insurance
plan can be continued under either:
-
a federal law, the
Consolidated Omnibus Budget Reconciliation Act (COBRA) if your employer has at
least 20 employees or
-
a state continuation law
if your state has such a law.
Another possible group health
insurance option is to enroll in your spouse’s employer plan, provided your
spouse works and is eligible for employer insurance. The Health Insurance
Portability and Accountability Act (HIPAA), a federal law, assures this
option. HIPAA also assures an individual plan option if there are no group
plan options. Individual plan options are established by the state in which an
individual resides.
COBRA
If you work for an employer with 20 or more
employees, (COBRA) requires your employer to offer a terminated employee the
option of continuing health insurance benefits (assuming that the termination
was not the result of gross misconduct on the part of the employee). A
terminated employee can continue COBRA for up to 18 months or until he/she is
covered by another group health insurance plan. When using the COBRA coverage,
employees are responsible to pay the full amount of the premium cost.
The employee has 60 days (from when
the regular insurance coverage ends or from when the COBRA election notice is
provided) to respond to the notice and elect COBRA coverage plus another
45 days after the COBRA election to pay the cumulative premium amount.
While it is an employee’s right to delay overall payment of the premium for up
to 105 days, a former employer
will
cancel the insurance until the COBRA premium payment is made. And although all
coverage will be made retroactive once the premium payment is received, this can
make it difficult to continue to receive medical and drug benefits during the
interim.
So if you
know you will be taking COBRA, it may be best to elect COBRA and make the COBRA
payment as soon as possible.
State
Insurance
Continuation
If your company has less than 20 employees,
some states have laws requiring employers to offer insurance continuation to
terminated employees. Some states offer this option only when COBRA does not
apply, while others offer the coverage as an option in addition to COBRA. For
those states that offer insurance continuation, the length of time in which
insurance can be continued and eligibility varies. To see if your state offers
this coverage and for information more on the specific requirements, contact
your state insurance commissioner’s office.
Employees
are responsible to pay the full amount of the insurance premium. The periods
for election of this option and payment of premium will vary from state to state
that has this option.
HIPAA Group Insurance Option
For individuals who have a spouse that works for an employer that offers
health insurance, HIPAA permits “special enrollment” in the spousal plan when
the individual loses employer insurance. The qualifying event is the termination
of one employer insurance. HIPAA allows immediate enrollment in the other
spouse’s employer insurance plan so that there is no gap in coverage.
Follow-up with the spouse’s employer’s Human Resources Department to ask
about enrollment, premium cost and benefits. Premium costs will usually be
lower than a COBRA or state insurance continuation option because the spouse’s
employer will usually pay a portion of the premium. If the spousal plan has
“good’ benefits, then this is usually the best option.
HIPAA Individual Insurance Option
For individuals who are unable to obtain group
insurance, an individual insurance policy may be available. HIPAA guarantees
access to an individual policy for “eligible individuals,” who are described as
the following:
Þ
Have had coverage for at least 18 months
where the most recent period of coverage was under a group health plan
Þ
Did not have their group coverage
terminated because of fraud or nonpayment of premiums
Þ
Are ineligible for COBRA continuation
coverage or have exhausted their COBRA benefits (or continuation under a similar
state provision)
Þ
Are not eligible for coverage under
another group health plan, Medicare or Medicaid or any other health insurance
coverage.”*
For more information about individual plan
options in your state, contact your state insurance commissioner’s office.
Anyone considering individual insurance plans should evaluate the benefit
coverage closely as many plans have higher deductibles and larger out-of-pocket
expense limits.
*Questions & Answers: Recent Changes in
Health Care Law, U.S.
Dept. of Labor Pension and Welfare Benefits Administration, April 1997.
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