If you've lost your job, you need to act fast to maintain adequate health insurance.
You have to decide, within 60 days of your separation, whether you want to stay on your former employer's plan through COBRA, the federal Consolidated Omnibus Budget Reconciliation Act.
What is COBRA?
COBRA is a federal law that requires your former employer to offer health insurance under the company plan to jettisoned workers for 18 months or more.
What does it cost?
That varies from plan to plan, but it can be very expensive -- upward of $1,000 per month for families.
That's because your employer probably subsidized your premiums when you were working, but doesn't have to now that you're gone. The economic stimulus law that passed earlier this year requires employers to provide a discounted rate on COBRA coverage for some former employees. The subsidized rate amounts to 35% of the regular COBRA cost, and lasts for nine months.
Can everyone qualify for the subsidy?
No. First, not everyone can get COBRA because the federal law exempts small businesses and companies that terminate their health coverage. If you lost your job because your employer went out of business, you're out of luck.
If you were laid off by a big employer that's still in business and offering health insurance to employees, you must be offered COBRA coverage. To get the subsidy, you have to have involuntarily lost your job and your access to company-provided health insurance between September 2008 and Dec. 31, 2009.
Secondly, the subsidy is income-tested, so if you earn more than threshold amounts, you'll lose some or all of it. Individuals with an adjusted gross income of $125,000 or more and families with $250,000 in income start to be phased out. The subsidy is lost once individual income exceeds $145,000 and joint income exceeds $290,000.
What if I lost my job in September and didn't opt for COBRA because of the cost?
Then you would be part of a group of people who should have been offered a second chance to join. Employers were told to notify qualifying former employees by mid-April that they could jump back on the company plan, and get the subsidy, if they signed up within 60 days of receiving that notice.
What do I do when COBRA coverage runs out?
In some states, including California, you can maintain the coverage for an extended period -- often as long as another 18 months. If you still haven't found another job that provides health insurance after that, you should contact your state's insurance department to discuss your options. If you have maintained coverage for the last 18 months, and have never let it lapse for more than 63 days, you are entitled to buy health coverage that has no limitations on preexisting conditions.
I have a child with diabetes. When my COBRA eligibility expires, is my only option to sign up for the state's high-risk pool?
No. You should actually consider splitting your family coverage. If everyone else is healthy, you may be able to get a low-cost policy through the individual health insurance market for everyone else. That one child could stay on group coverage through COBRA, or get coverage through the State Children's Health Insurance Program.