Your overriding goal should be to hang on to some kind of group coverage for as long as you can. It is almost certain to be better than anything you could buy on your own, and it preserves your ability to maintain coverage if you ever develop a serious medical condition.
Here are your insurance options:
Join your spouse's or domestic partner's plan
That might be the most affordable option, if it's available to you. The loss of a job is considered a "qualifying event," which means you won't have to wait until the next open-enrollment period to change plans as you normally would. If your spouse and children previously were covered under your plan, they can switch, too. The federal Health Insurance Portability and Accountability Act (HIPAA), which grants you that right, says you have to make the switch within 30 days of losing your previous coverage.
Take COBRA if you can afford it
The Consolidated Omnibus Budget Reconciliation Act, another federal law, usually gives you the right to stay on the health plan you had at your old job. Usually you have to pay the entire cost yourself, including the part that your employer used to pay—often 70 percent or more—plus an extra 2 percent for administration. With family coverage topping out at more than $1,000 per month, the vast majority of unemployed people eligible for COBRA end up turning it down because they can't afford it.
The federal economic stimulus bill passed in February 2009 tries to make COBRA more affordable for the newly jobless. It created a subsidy to pay for 65 percent of COBRA premiums for people laid off between Sept. 1, 2008, and Dec. 31, 2009. The subsidy lasts for nine months and phases out if your income tops $125,000 for an individual or $250,000 for married couples.
According to the Department of Labor, here's how it is supposed to work: If you're laid off, you'll get a notice saying you're eligible for the subsidized coverage, with instructions on how to sign up. (If you believe you're eligible and don't get the notice, ask your former insurer for it.) Your 35 percent share is what you'll pay for nine months. The government will reimburse your former employer for the other 65 percent.
If you lost your job last fall and turned down COBRA because you couldn't afford it, you can still sign up for the subsidized coverage now.
Not everyone who loses a job is eligible for COBRA
If your company went out of business, there's no COBRA because there's no group health plan to continue on. If you were fired for gross misconduct, you're not eligible. And COBRA doesn't apply to companies with fewer than 20 employees. (But 39 states plus the District of Columbia have "mini-COBRA" laws that extend COBRA rights to smaller employers' workers. The federal subsidy applies to mini-COBRA plans, too.)
After your nine-month subsidy runs out, you're entitled to continue your COBRA coverage for another nine months, or 18 months total, but you'll have to start paying the full cost. You have 60 days to choose that option, so you might consider waiting to see whether you get a new job before the deadline.
Ask about a conversion policy
In 33 states plus the District of Columbia, if you're not eligible for COBRA or mini-COBRA, the law requires your group insurer to convert your coverage to an individual plan without a waiting period or exclusion of pre-existing conditions. But there are many complexities and caveats. In most of those states, insurers can charge whatever they want for coverage—usually a lot. Your state insurance department can provide you with the details for your state.
Check out Medicaid, CHIP, and the VA
If your income takes a big enough hit from your job loss, you or your children might be eligible for one of those public health plans.
CHIP, the Children's Health Insurance Program, is available in every state. In some states it covers children in families earning as much as three times the federal poverty level, or $66,150 in 2009 for a family of four. CHIP offers comprehensive coverage, now including even dental coverage. Recent legislation provided $33 billion in federal funding to maintain the federal CHIP plans and expand coverage for children over the next four years. If you are eligible for both subsidized COBRA and CHIP, you can save money by putting kids on CHIP and adults on COBRA.
Medicaid is designed for people with incomes near or below the poverty line (though in a few states unemployed parents can earn up to twice the poverty limit and still qualify).
If you believe there is any chance you or your children qualify for either of those programs, apply for them, advises Donna Cohen Ross, director of outreach for the Center on Budget and Policy Priorities, a policy-research group in Washington, D.C. "If you apply for CHIP coverage for your child, in most states they will figure out which program you qualify for, and you'll only have to fill out one simplified application," she says. Find your state's programs by entering your state's name in the search box.
If you are a childless adult without disabilities, it is unlikely that you will qualify for any kind of Medicaid, Cohen Ross adds.
Military veterans might qualify for free or reduced-price treatment at Veterans Affairs hospitals and clinics. The VA doesn't have enough funding to cover all veterans, though, so it has a priority list, with those who have been injured or disabled in combat at the top. Financial need is also taken into consideration. If you are a veteran, check with your nearest VA facility to see whether you are eligible for services.
