RebelCapitalist: Financial Information for the Rest of Us | Unemployment and Health Coverage: No Good Options

Unemployment and Health Coverage: No Good Options

Mar 06, 2009 | By: Mr_Blue | Comments | Permalink | Tags: unemployment, health care

The lose of health care coverage with the lost of a job is one of the biggest tragedies that is unfolding daily with this economic crisis. Studies have shown that for every 1% increase in unemployment 1.1 million people are added to growing number of uninsured Americans.Losing health care coverage is probably the most stressful situation with unemployment especially with families with children or families with members who have “pre-existing conditions”. Unfortunately, middle class families have very few options.

The New York Times Online has an article today about “Hanging On to Health Coverage.” The article provides some good advice such as making sure you get those last minute physicals and dental examines done right away if you are sensing that lay-offs are coming or signing on to spouse’s plan if that is even an option. But for middle class families the options are very limited.

One option is COBRA. COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act of 1986. This law gives workers and their families the option of continuing group health care coverage for a limited period of time and at the person’s expense. The article provides some good advice about using COBRA coverage:

If you do choose Cobra, pace yourself. Time it right, and you can essentially get two months of free Cobra coverage.

After your last day of coverage under your employer’s plan, you have 63 days to sign up to extend that coverage under Cobra. If you think you’re on the verge of getting a new job, or if you’re trying to find a more affordable insurance option, you can put off paying two months of Cobra premiums until you approach the deadline. If the new job or alternate insurance works out, you will have avoided those hundreds of dollars in Cobra premiums. But if you do fall ill or get in an accident in the interim, you will be covered — as long as you pay those back premiums.

Do be vigilant, though, about that 63-day deadline. Miss it, and you lose your Cobra eligibility.

The problems with COBRA are that a person pays the full premium cost of the health care coverage which could be very expensive and COBRA coverage is for 18 months. COBRA is not an option for people who worked for employers that didn’t provide health care coverage. President Obama’s stimulus plan does provide limited temporary relief for laid-off workers but if you qualify it only covers a small portion of monthly premium and it the relief only lasts 9 months.

The other option is to try to purchase a health insurance policy from an health insurance company such as Blue Cross/Blue Shield. Obviously, this is very expensive and may not be an option for families with members that have “pre-existing medical conditions”. The deductibles for such policies can be extremely high.

Some states do have State Children’s Health Insurance Plans (SCHIP). These are state run programs funded in part from the federal government. SCHIP might be a good option to provide coverage for your children.

Sadly, there are very few good options available to families who are experiencing unemployment. This current economic crisis will hopeful instigate much needed health care reforms so that the pain and anxiety of health care costs will not be overwhelming to people during a vulnerable time.

Things are getting nasty out there. Good luck.