Losing Your Job, Not Your Insurance

Being laid off causes major financial strain, but it doesn't have to mean you won't have health insurance. Stephanie AuWerter, Contributing Editor for SmartMoney.com, has some tips for maintaining your coverage.

Once you've been laid off, your mailbox will be flooded with paperwork. Keep an eye out for COBRA forms, though. "COBRA is a federal law... that allows you to maintain the healthcare coverage from your previous employer for up to 18 months after you lose your job," says AuWerter. The downside is that COBRA can be expensive, often costing over $1,000.00 or more a month for family coverage. Under President Obama's Stimulus Package, though, there was a tax subsidy included that will cover up to 65% of your COBRA premium cost for nine months, which can alleviate some of the financial strain.

Keep in mind too that some people don't qualify for COBRA coverage. If you were fired, rather than laid off, or your former employer has less than 20 employees, COBRA may not be an option.

If COBRA doesn't seem like it's for you, consider coverage under your spouse's plan. If you're married, "Because you're going from one group plan to another, you can't be denied coverage because of a pre-existing condition," says AuWerter. However, if your spouse loses his or her job or you're going to get a divorce in the near future, you'll need to invest in COBRA coverage through your spouse's plan instead of your own.

You don't have to get coverage through an employer, though. Try shopping around for individual policies. "You never know, you might find a better deal," says AuWerter. Individual policy rates are based on your place of residence, health and the type of coverage you're looking to purchase. "No matter what, you don't want to scrimp on the quality of the provider," says AuWerter. If you don't qualify for COBRA, this may be the option for you.

If you're looking to cut costs on an individual policy, consider a health savings account. "Here, you basically get coverage for the big healthcare expenses and you agree to self-insure for the smaller stuff," says AuWerter. You'll need to purchase health insurance with a high deductible and then pair it with your health care savings account. This can keep costs down and is usually a good option for people in relatively good health.

If all else fails - or you're confused about your options - contact your state's insurance comissioner. "Among other things, they can tell you if your state has a 'high risk' pool... it can be an option of last resort," says AuWerter.

No matter what, AuWerter says its important to maintain coverage. "It's a major cause of bankruptcy," she says. While insuring yourself or using COBRA might be costly, if a true medical emergency arises, it will be cheaper than paying out of pocket in the end.

For more information on lay-offs and health insurance, as well as additional personal financial advice, click here to visit www.SmartMoney.com.
By Erin Petrun