Insurance choices for jobless

Q: I just lost my job. What are the best options for preserving some form of health insurance?

A: Don't confuse "best" with "affordable." One of the first lessons many unemployed people learn is how expensive health insurance can be.

If you're lucky, you can switch to coverage from the job of a spouse or family member. For most people, though, the best option lies with coverage provided under the Consolidated Omnibus Budget Reconciliation Act, or COBRA.

Employee-sponsored coverage generally ends when a job does, although some people may get a few extra weeks because their company paid premiums through the end of a month, said Cheryl Fish-Parcham, deputy director of health policy at Families USA, a nonprofit organization that advocates for low-cost health care.

COBRA allows people to continue the plan they had at work after that coverage ends. The former employee must make a decision within two months of leaving the job, and he or she will pay a hefty price to keep the coverage going.

Full premiums can average out to about $400 a month for individuals or $1,000 for families, said Karen Pollitz, a research professor at the Georgetown Health Policy Institute.

Employers normally pay a large chunk of that cost for their employees. People who become unemployed wind up paying all of it, plus a small administrative fee.

A COBRA plan's price often becomes a "conversation stopper" for someone who just lost his income, Pollitz said. Studies show only 20 percent of people who become eligible for COBRA plans use them.

People who opt for a COBRA plan need to know whether they will be billed for premiums or whether they're expected to make them without the paperwork. Read the notices carefully, because your coverage could be dropped if you miss a premium payment, Fish-Parcham said.

COBRA plans last 18 months but can stretch longer for people with disabilities or special circumstances. That act applies to employers with 20 people or more. State laws generally provide coverage guidelines for businesses smaller than that.

Besides COBRA

Some people may find other health coverage through a trade group or association or possibly their church. But for many, COBRA plans are the best option. The individual market can be "pretty grim," Pollitz said.

Individual policies often exclude such pre-existing conditions as diabetes, and they can be even more expensive than the COBRA option.

"Be very careful if you decide to go with something cheaper that you're buying on the individual market because you really don't have the same protections," Fish-Parcham said.

For low-income families with children, Medicaid may provide some coverage. Some states also offer a high-risk coverage program aimed at people who can't find insurance on the open market. But those can be "hugely expensive," Fish-Parcham said, depending on the state.

As unattractive as all these options sound, they're still better than gambling and going without insurance for a few months between jobs.

"You can't really predict when you're going to be in an accident, when you're going to be diagnosed with cancer, when something bad is going to happen," Fish-Parcham said. "Unfortunately, we talk every day to people who've paid the price of these high risks."