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Health coverage for the jobless
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January 30, 2002: 5:01 p.m. ET
If you think you may lose your job, research health insurance options.
By Annelena Lobb
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NEW YORK (CNN/Money) - Losing your job means not only lost income, but loss of employer-sponsored health benefits as well.
Most Americans rely on their employer for health coverage -- and the number of uninsured rises along with the unemployment rate. An analysis by the Kaiser Family Foundation, a health policy think tank, found that every percentage point increase in unemployment means about 1.2 million more uninsured people.
Using COBRA
If you have lost your job, or you think you may be laid off, research your health insurance options. If you're married and your spouse works, your best bet is probably to enroll under your spouse's coverage. If you're single, your first option is to use COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985), a federal law that allows you to continue the coverage you had through your former employer for 18 months.
But COBRA requires that you pay the entire premium yourself, plus another 2 percent in administrative costs. That's 102 percent of full price, whereas your employer probably paid 70-to-80 percent of the premium while you were working.
The only financial advantage to COBRA is that the price of the premium is set at the group rate offered to your employer, not an individual rate, which would usually be much higher.
"Most people who are eligible for COBRA don't take it," said Larry Levitt, vice president of the Kaiser Family Foundation. "About 20 percent of eligible people use it. The other 80 percent buy on the individual market, or are uninsured."
Levitt said continuing coverage for a hypothetical family of four under COBRA for one year could easily cost as much as $7,000. "It doesn't last forever, and $600 or $700 a month is a lot to pay when someone has lost their income," he added.
Other options are available, although accessibility varies immensely from state to state. If you're in perfect health, you'll probably have much less trouble finding an insurer that will accept you and will pay less for health insurance than if you have a pre-existing health condition.
If you're not sure whether to choose other insurance or continue your old coverage with COBRA, you do have 60 days to decide, starting on the date you lose your job. If, for instance, you choose COBRA coverage 45 days after you lose your job, coverage is retroactive to the date you lost your job, said Rachel Christensen, a research analyst at the Employee Benefits Research Institute. Some people use this window to shop for outside coverage. If they can't get a better deal, they elect COBRA coverage.
Using short-term insurance policies
"Your employer probably picked coverage rich in benefits, because he got a group rate. Individuals usually pick a simpler insurance plan, which probably has higher deductibles and higher co-payments, because it costs a lot less," said Randy Clerihue, a spokesperson for the Health Insurance Association of America.
If you are healthy and just need short-term coverage while you look for a new job, your best bet may be looking at the six-month, three-month, or month-to-month policies that some health insurers offer, said Victoria Bunce, research and policy director for the Council for Affordable Health Insurance.
Fortis Health Short Term Medical Insurance, for example, insures you for 30-to-185 days and offers deductibles from $250 to $2500. But you can't buy this type of coverage if you're pregnant, eligible for Medicare, were declined by another carrier, or traveling outside the United States.
"Short-term policies are the best option for someone who's just in between jobs," Bunce said.
ReadyMed is another short-term insurance product with similar deductibles, available for two-to-six months at a time. Again, that's if -- and this is a big "if" -- you don't have a pre-existing medical condition. "It's basically for healthy people who want protection against some sort of accident or illness in the short term," said Janey Phillips, a spokesperson for ReadyMed.
Prices on this kind of short-term coverage can vary immensely. It's not just a question of comparison shopping between insurers: it also depends on your age, your deductible, whether you're male or female, whether you're insuring yourself or a family, and the state in which you live.
A 30-year-old single woman in Ohio who chose a ReadyMed policy with a $250 deductible, for example, would pay $105 for two months' insurance, $205 for four months, and $305 for six months. By contrast, a 50-year-old male in Tennessee who chose a $250 deductible would pay $241 for two months, $477 for four months, and $713 for six months. If he chose a $500 deductible, the policy would cost about 15 percent less.
Pre-existing conditions
If you do have a pre-existing condition, you're on shakier ground. Most short-term insurance policies won't accept you, and the only way you can guarantee health coverage is by exhausting your COBRA coverage. After the 18-month period has passed, an insurer in your state is then required to accept you, under the 1997 Health Insurance Portability and Accountability Act (HIPAA).
"There may be stipulations when you buy an individual policy if you have a pre-existing condition," Bunce cautioned. "You may have a rider on the policy -- a clause that says they'll cover you for everything except certain things." Riders are prohibited in some states, like California and Indiana.
A 2001 study by the Kaiser Family Foundation that measured accessibility of individual health insurance for consumers in less-than-perfect health found extremely wide variations in benefits and premiums, based on the age, residence, and health status of the applicant.
Seven hypothetical consumers of varying ages and with varying health conditions each made 60 applications for individual coverage in 8 U.S. cities. "Denise," a 48-year-old, 7-year breast cancer survivor, was rejected 43 percent of the time. "Frank," a 62-year-old, overweight smoker with high blood pressure, was rejected 55 percent of the time. Even "Alice," a 24-year-old with hay fever, was rejected 8 percent of the time.
When coverage was offered, it often came with premium surcharges or restrictions on coverage. Frank's annual premiums ranged from about $3,000 to as much as $30,000. Alice, through a combination of her youth and relatively mild health condition, received the lowest premium offers, ranging from about $400 to $4,600.
"If you have even a mild health condition, your premium could be surcharged, or you could be denied coverage entirely," Levitt said. "If you have a serious illness, rest assured that you're going to be denied. But if you have a mild condition, even something like hay fever, you may face limitations or even denial."
Other options
Unfortunately, there aren't too many other options out there. If you're a member of a trade group or professional organization, you may find they offer health plans to their members. Groups from the National Association of Female Executives to the Society of American Silversmiths offer health insurance options to their members. They may not be the best deal you can get, however. Be sure to comparison shop with short-term plans.
If you're turned down by private insurers, and if you can afford it, you can enter your state's high-risk pool. About 30 states have them. Premiums are usually more expensive than the premiums sold by private insurance companies. "Their premiums are typically about 150 percent of what a standard-risk premium in the private market would cost," said Ed Neuschler, senior program officer at the Institute for Health Policy Solutions.
"People who lose their income and don't have any other coverage may be able to find public sources of health insurance for their kids," added Neuschler.
The Children's Health Insurance Programs, or CHIP programs, are free in most states. In a very few states, like New Jersey, the CHIP programs will also cover parents for a nominal fee.
"There's very little out there beyond COBRA, the private market and the state programs for kids," Neuschler said. "The biggest problem for the unemployed is not whether there are venues available -- it's just that they're too costly." 
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