Laid-off workers still have health insurance options

August 03, 2008|By Dan Serra | Dan Serra,McClatchy-Tribune

Individuals who find themselves a victim of a layoff or find a new job that doesn't offer health insurance face a difficult task in deciding how to replace that insurance. While the options may be more expensive than a subsidized corporate plan, some do offer tax benefits an employer cannot.

The first option is to continue your previous employer's insurance through COBRA. While this maintains your coverage, it's expensive, as you now must pay the full premium and employers usually tack on an extra 2 percent to cover administrative fees.

Instead of this option, explore an individual policy with the same insurer or another provider that includes your doctors in its network. If you are healthy, you could also lower the benefits provided to get a lower rate. For example, if you've only been going to the doctor for routine visits or emergencies, you might opt for a higher deductible. Just don't wait too long to get new insurance, as pre-existing medical conditions might not be covered if you have been without insurance for more than two months.

Another option is to use a health savings account. These let you make tax-deductible contributions to a savings account in which withdrawals are tax-free if used to pay medical costs. Any other withdrawal purpose is subject to a 10 percent penalty. The balance when you turn 65 can be withdrawn for any reason without tax penalties. You must pair the HSA with a high-deductible medical policy and not be eligible for coverage from your or your spouse's employer.

For entrepreneurial individuals, starting a business brings the most benefit for health insurance. A business, whether it's one person or a corporation, can deduct the cost of health insurance. Therefore, an individual can start a business, buy insurance for his or her family and then deduct the cost when filing income taxes.

However, like the HSA, the individual or spouse must not have access to health insurance through an employer. Also, the individual cannot deduct any cost of the insurance that's more than the net profit from the business.

To help you sort through the myriad choices, start by asking an independent insurance broker to shop the marketplace for policies that fit your situation. An independent broker is not limited by one insurance company and can compare policies for you. Since they are compensated by the insurance company that you select, make sure you are given at least three options and even submit your request to at least two brokers.

Also, try searching online at eHealthInsurance.com and consulting with a financial adviser, who may have further resources available and help you make your decision.

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