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Health Insurance for the Unemployed

If you are recently unemployed, you are likely eligible for a COBRA health insurance plan. If you are eligible for a COBRA health plan, it is useful to compare the cost and benefits of the COBRA plan to an individual or family health insurance plan. Typically, for people under the age of 50, an individual plan is much less expensive than the cost of COBRA.

Note, however, that in 2009, if you became unemployed due to a lay-off and make less than $150,000 per year as a single, you are eligible for a federal subsidy of 2/3 the cost of your COBRA for a period of 12 months. This is in all cases a better option than declining COBRA and buying an individual plan. Also note that you must be relatively healthy to be eligible for an individual insurance plan.

If you've been unemployed for an extended period and are therefore not eligible for COBRA, then you should consider an individual or family health insurance plan. Such plans can be acquired for far less than a small group insurance plan and often can be even less than what an employee will pay towards his or her group insurance plan. If you believe you will be employed in the near future and eligible for a group plan, you should only consider short-term insurance in the event that you do not medically qualify for an individual insurance plan. This is because short-term health plans have very limited coverage and do not cover any preexisting conditions from the past 5 years. Furthermore, employers often have waiting periods before an employee is eligible for the group plan, and the required contribution toward the group plan is often very expensive.

Acquiring an individual health plan, even a very high deductible plan, can be a great value for someone who is unemployed. For instance, Humana has a high deductible plan in many states with a $7500 deductible and very low monthly prices. The plan can be terminated at any month and, even though it will not provide a lot of coverage for routine health services, the insured gets the benefit of Humana's deep discounts at the doctors' offices, hospitals, laboratories, and other medical providers. For instance, a typical hospital stay might cost $4000-$5000 for someone who is not insured. But if you have a high deductible plan and stay at the hospital for one day the cost of that stay is typically marked down by 50-60% if the hospital is a preferred provider in your health plan’s network. So for the unemployed, either way, purchase the COBRA or get an individual health plan, whichever turns out to be the better value.