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A Quick Guide to Health Insurance for the Newly Unemployed

Ed Note:When you lose a job, you lose more than just a paycheck. You also lose any employer-paid health insurance benefits. Fortunately, you have lots of options for keeping or replacing your current health insurance policy.

Getting laid off will make you feel bad enough, but realizing that you now have to figure out what to do about your health insurance can fill you with absolute dread. While we can’t get you a new job, we can help you sort out the options you have when you lose employer-paid health insurance.

COBRA
As long as your employer has 20 or more workers, you can keep the health insurance coverage you got from your job for up to 18 months thanks to COBRA. The catch? You have to pay for it — and the average employer-paid family health insurance policy costs about $1,400 a month.

Fortunately, you get 60 days to decide whether you want to continue the policy and then another 45 days to pay your first premium.

Since you have two months to decide, don’t say yes or no to COBRA right away. Instead, work the system to your advantage. If you have significant medical bills during the 60-day window, you can sign up at any point during those 60 days and get retroactive coverage.

Meanwhile, ask Human Resources for a list of all the health insurance plans your company offers. If your former employer offers a lower-cost policy, you may be able to switch into it if you end up unemployed for more than 60 days.

Also ask if your employer-provided coverage will go through the end of the month. If it does, get your prescriptions refilled and doctor visits in before you lose coverage.

The Health Insurance Marketplace
During the 60-day COBRA window, check out your other options, starting with the Health Insurance Marketplace which is an online source of information about state and federal health care exchanges and coverage options.

Filling out the online Marketplace forms can be tedious.
Nevertheless, at this website you'll find out:
  • What you’d pay for health insurance plans offered in your state
  • How much, if any, premium tax credit you’ll get
  • If you or your children qualify for free or low-cost health insurance coverage
Avoid the temptation of going with the lowest monthly premium. Check out all the costs of the plans, including co-pays, deductibles and the total amount you’d have to pay if you rack up high medical bills.

Long-Term Unemployment
In the current economy, about one-third of jobless workers remain unemployed for more than six months. If you know you can’t afford COBRA coverage that long, you may need to move to a lower-cost marketplace insurance policy within 60 days of losing your job.

There are enrollment windows for the marketplace policies. In 2014, the open-enrollment period ends March 31. The 2015 enrollment window is Nov. 15, 2014 to Jan. 15, 2015. If you lose your job or your income changes, you can enroll even if you’re outside the enrollment window. However, your ability to enroll outside the enrollment period lasts only for 60 days — starting on the date you lost your job or your income changed.

As Income Drops, Health Insurance Choices Grow
Medicaid covers low-income Americans and people with disabilities. Some states have expanded Medicare coverage to individuals with income above the federal poverty line so you should check if your state is among them. The Children’s Health Insurance Program covers children and sometimes pregnant women.

Options When You Can’t Afford Coverage
Don’t like the options you’re seeing? Here are some other sources to try:
  • Younger than 26? You can get on your parents’ policy.
  • Belong to a trade or professional association? See if it offers members health insurance plans.
  • Have a chronic condition? Seek care via a clinical trial.
  • Look for a local free clinic.
  • If you’re within three months of being 65 or older, you can sign up just for Medicare and apply for retirement benefits later.

Tax Penalties for the Uninsured
Being without health insurance could cost you at tax time. The Affordable Care Act penalizes Americans who have no health coverage. For 2014, the penalty is 1 percent of your annual income or $95, whichever is more. You’ll also pay a $47.50 penalty for each uninsured child, up to a family maximum of $285. The penalties can be a bit complicated to decipher, so read up on the specifics and check out the exact equation.

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If you have significant medical bills during the 60-day window, you can sign up at any point during those 60 days and get retroactive coverage.
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