What to do when COBRA runs out

By Bankrate.com

As the unemployment rate hovers around 10%, growing numbers of jobless Americans worry about securing health insurance.

Unemployed workers across America can elect to retain health insurance coverage temporarily through their former employer via COBRA, the landmark health care legislation passed by Congress in 1986.

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The government is now paying 65% of monthly COBRA costs for up to 15 months. Workers pick up the tab for the remainder.

But what happens if your COBRA coverage expires and you haven't found a new job yet?

New health care reforms will change your options over the next few years. But for now, health insurance and financial experts say, unemployed workers have an array of post-COBRA options for medical coverage.

 

Here are a few health insurance alternatives experts recommend:

1. Sign on to your spouse's plan

Joining a spouse's plan is often the cheapest and most comprehensive option for medical and prescription drug coverage.

 

"Anybody with a working spouse should try to get on that spouse's plan,'' says Phil Lebherz, the founder and executive director of the Foundation for Health Coverage Education in San Jose, Calif.

Mark Cesarano, a former corporate COBRA benefits administrator, says turning to another employer group plan through a spouse offers "best benefits at the lowest rates.''

But there's one major roadblock to this approach: Unemployed workers typically can join a spouse's plan only during the company's annual open-enrollment period.

2. Buy an individual plan

Under the federal Health Insurance Portability and Accountability Act, or HIPAA, your former employer's health insurance carrier has to offer you an individual medical insurance plan after COBRA coverage expires, Lebherz says.

 

Typically, the insurer that continued your health benefits via COBRA will mail you a letter explaining HIPAA coverage options. Lebherz urges people to ask the carrier about the coverage at least a month before their COBRA is set to run out.

There's nothing to preclude you from shopping for a private health insurance plan with another insurer that may cost less or better suit your needs. However, the HIPAA protections allow you to buy a plan from your former employer's health insurance carrier that has no expiration date like the COBRA plan, meaning you can keep the coverage as long as you need it, provided you pay the premiums.

 

In addition, your former employer's health insurance company must cover any pre-existing medical conditions, something not true of other private plans.

Jobless workers who buy individual insurance should not expect it to be as cheap as their former work-based plan, says Cesarano, a managing consultant for The Savitz Organization, an employee benefits firm in Philadelphia. "Don't expect to get the same type of coverage at the price your employer offered, because your employer had the power of group purchasing,'' Cesarano says.

3. Buy coverage through your home state

All 50 states offer public medical coverage options for qualified adults and separate low-cost medical coverage for children, Lebherz says. However, there are eligibility requirements, so not every resident qualifies.

 

The Foundation for Health Coverage Education has put together an online database with information on what public medical coverage options are available, Lebherz says. You can review the data here.

"On our site, you can start by taking our quick, five-question eligibility quiz to help point you in the right direction for coverage options and eligibility requirements in your respective state," he says.

Matt Tassey, a principal with Scribner Insurance in Portland, Maine, and a past chairman of the nonprofit Life and Health Insurance Foundation for Education, says a state's insurance bureau or department is a good place to start if you have questions about medical insurance options.

4. Check trade groups and associations

Many business groups, local chambers of commerce and even college alumni associations offer members medical coverage, experts say.

 

Trade groups can help you get discounts on health care, says Robert Laura, a registered investment adviser in the Ann Arbor, Mich., area who also helps clients find ways to pay for health insurance.

"Sometimes business groups can drop you into a group pool," for coverage, Laura says. "Try to get yourself in a group or discounted situation to offset health insurance prices."

Trade groups that offer health insurance typically cater to small-business owners. So someone who starts a business or works as an independent contractor is more likely to be eligible for benefits, Cesarano and Tassey say.

5. Qualify through Medicare or Medicaid

Individuals who are at least 65 years old and not planning to return to work or who are disabled at any age (according to Social Security Administration rules and definitions) qualify for government-sponsored Medicare health benefits, Cesarano says.

 

Individuals with household incomes low enough to fall within federal poverty guidelines can apply for Medicaid through their respective states.

This article was reported by Paul Bomberger for Bankrate.com.