Health Insurance Between Jobs
By Kristi Vaughan
Sometimes the scariest part of losing a job isn't the job itself but the health benefits it came with. What can you do in this situation?
COBRA
For many individuals the answer will be to keep their group health benefit plan for a limited time. This is made possible by the Consolidated Omnibus Reconciliation Act (COBRA). This act was passed by Congress in 1986. It covers those who had worked for employers with 20 or more employees. It also covers qualified spouses, former spouses and dependent children. It does not apply to individuals who have lost their jobs because of gross misconduct.
Generally, if you elect COBRA coverage, you will pay the full cost of the group insurance. If your former employer previously paid for most of the insurance costs this can be a significant jump in cost to you. You also may be required to pay a 2 percent administrative fee. However, these costs are almost always less than you would pay were you to seek individual coverage.
If you are entitled to COBRA coverage your employer will notify the plan administrator who, in turn, will send you an election notice. You have 60 days to elect coverage and another 45 days after electing coverage to pay the first premium. COBRA coverage usually lasts for 18 months but, under some circumstances, can be extended.
The U.S. Department of Labor offers a list of Frequently Asked Questions about COBRA Continuation Coverage.
Individual health insurance
If you are not eligible for COBRA, or you are past the 18 month limit of continuation coverage, you will need to find an alternate source of insurance. The Insurance Information Institute suggests several options:
- Ask if you can convert your group policy to an individual policy
- Opt for coverage under your spouse's plan, if he or she is employed and has health coverage
- Look into any trade groups, professional associations and the like that you belong to which may offer health insurance
- Buy an individual policy that at the very least protects you and your family from catastrophic expenses
Don't let insurance lapse
In the past, people were sometimes reluctant to leave jobs because going to a new employer might mean denial of insurance coverage for a period of time if there were any preexisting health conditions. However, in 1996, a law was passed that reduces this fear.
The federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) provides some protection against denial of new insurance because of preexisting conditions. To be eligible for these protections you must meet all of the following conditions:
- 18 months of creditable coverage without a significant break in coverage. A significant break is considered 63 days or more.
- Most recent coverage was through a group health plan
- Ineligible for coverage under any other group health plan
- Not eligible for Medicare or Medicaid
- No other health insurance
- Didn't lose insurance because of fraud or failure to pay premiums
- Accepted and used up your COBRA continuation coverage
