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.