Dealing Without Health Insurance

The reality of losing a job and the health insurance that went with it is daunting for people accustomed to employer-sponsored plans. It's a challenge self-employed people struggle with all the time, but going it alone on the open market is becoming more common as employers bow out of the health care business.

Karen Pennington, Ph.D., an associate professor in the nursing program at Regis University, says, "75 percent of the health care in this country traditionally comes from your place of employment. That number is falling. It is now down to 73 percent because employers are saying, 'I can't do it anymore. It's either pay an employee or pay into a health care system and fire an employee.'"

While the current administration places health care among its top priorities, it will take time to implement a plan. In the meantime, if you find yourself outside the relative safety of group health insurance plans, you have important decisions to make. Here's how you can make the best of a tough situation.

3 ways to avoid gaps in insurance coverage
Any lapses in health insurance coverage void federal and state protections and make getting insurance harder or even impossible. Avoid them whenever possible.

COBRA. The Consolidated Omnibus Budget Reconciliation Act, or COBRA, allows employees, in most cases, to continue an employer's group plan at their own expense for up to 18 months. Often this is the best option if serious medical conditions make you ineligible for private health insurance, but it can be expensive. "COBRA was more than our mortgage," says Christina McMenemy of Columbus, Ohio, whose husband lost his state job in June 2008. "We're talking over $1,200 a month for a family of four, and we were like, 'Wow! That's just too much.'"

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Unfortunately, the McMenemy family falls outside criteria for COBRA subsidies embedded in the American Recovery and Reinvestment Act of 2009, signed into law in mid-February. The act offers premium assistance of 65 percent toward COBRA insurance for up to nine months, not the full 18 months, under the following conditions:

• The unemployed person has an individual income of less than $125,000 per year or a family income of less than $250,000.
• The person must be laid off between Sept. 1, 2008, and Dec. 31, 2009.
• The person was participating in group coverage at the time of layoff.

Another caveat is that the former employer must continue to exist, so if a company files for Chapter 7 bankruptcy, these subsidies would not apply.

However, says Sam Gibbs at eHealthInsurance.com, "If a person was laid off in September 2008 and did not choose COBRA within the required 62-day window, the new stimulus package allows them to become eligible for COBRA again, as long as the former employer continues to exist and offer group coverage."

For those currently employed but worried about needing COBRA, Gibbs recommends downgrading your insurance to a less expensive option during the annual open-enrollment period.

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