Include health care in emergency plan

If you lose your job, insurance is still available and important to have, but it will cost a lot more

December 14, 2008|By Carolyn Bigda | Carolyn Bigda,Chicago Tribune

With the unemployment rate rising fast, you might be worried about the future of your paycheck. Another thing to consider: How you'll pay for health insurance.

Most people younger than 65 obtain health insurance through an employer, according to a survey by the Kaiser Family Foundation and the Health Research Educational Trust, which study health-care policies.

When you lose your job, you may be entitled to keep your coverage for up to 18 months, depending on the size of your firm. But like your paycheck, any subsidy you received for the premium, and employers frequently cover 50 percent or more of the annual cost, goes away.

The full cost of an employer-provided plan can be pricey: On average, the annual premium for an individual policy in 2008 was $4,704, according to the Kaiser/HRET survey. A family plan was $12,680.

The cost is easy to overlook in your emergency planning. For one, because employers pay a portion of the annual premium, you may not know the total bill. Also, any contribution you make to the premium is deducted automatically from your paycheck, pretax.

With some planning, though, you can make sure you don't become uninsured should you lose your job. Because, as expensive as buying your own coverage may be, you can't afford to go without it.

Avoid a coverage gap: If you are being laid off, call your benefits department immediately. If eligible, you can sign up to extend your health-care coverage, better known as Cobra, within 60 days of becoming unemployed. Keep in mind that you are billed for the full 60 days even if you sign up at the end of the two-month period.

Although Cobra is not cheap - you're typically charged 100 percent of the total premium, plus another 2 percent for administrative fees - it's critical not to allow a lapse in coverage of more than two months. Otherwise, it becomes much more difficult to qualify for a new plan or avoid lengthy exclusions for a pre-existing condition.

If you are married and your spouse has insurance, you typically have 30 days from the time of unemployment to be added to his or her plan, even if it's not the open-enrollment period.

Buy an individual plan: If you signed up for Cobra but can't afford to pay the monthly premium for the length of your job search, consider buying a policy on the individual market.

Cory Ingram, 33, a former pilot who lives in Long Beach, Calif., took this approach. Under Cobra, he paid $1,000 a month for a family policy, which covered his wife, son and infant daughter. Eventually, however, the monthly premium became a strain on his budget. He shopped online for a policy and now pays about $460 per month for a family plan.

Like Ingram, you can search for a policy online at www.ehealthinsurance.com, a brokerage for health plans in the individual market, where you buy insurance on your own rather than through a group.

Keep in mind that these plans generally are not as comprehensive as your employer's coverage; that's why they are cheaper. Your deductible, for one, likely will be higher. If you're young and healthy, a bare-bones policy may suffice. Just make sure not to skimp on catastrophic care, such as extended hospital stays.

E-mail Carolyn Bigda at yourmoney@tribune.com.

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