More than 30 million Americans are now out of work as a result of the COVID-19 crisis and their personal finances have taken a severe hit. But as the unemployment claims increase by the millions on a weekly basis, there is another concern on the minds of Americans who were laid off or furloughed: health care.
Losing your health coverage during a medical crisis is frightening. In fact, the National Endowment for Financial Education found in a recent survey that 48% of Americans are worried about the ability to pay bills. In light of COVID-19, this worry likely includes paying for health care when you are unemployed.
Americans need to understand the options out there to stay insured. The COVID-19 crisis is not a time to take a risk with your coverage. Further depending on your company’s plan, your health coverage might cease on the day your employment ends or the last day of the month of your employment.
As a result, many Americans need to come up with a strategy on how they can handle coverage going forward until they are back to work. And they cannot wait to make this decision.
COBRA is an option
One of the first options available to Americans is simply going on COBRA. Despite its ominous name, COBRA stands for Consolidated Omnibus Budget Reconciliation Act and allows employees and their dependents to stay on their health care coverage once they lose their job or their hours are reduced to no longer have them eligible for health care coverage.
“COBRA is the simplest and quickest way to ensure continued healthcare coverage after a layoff. It’s especially important during a higher-risk time like a pandemic,” says Mark Waterstraat, President of Consumer Solutions for Alegeus, a consumer-directed healthcare solution provider.
To access COBRA, there needs to have been a qualifying event such as a voluntary or involuntary termination. Further, if obtained, COBRA coverage will last 18 months after the qualifying event. Some states, like California, will even extend it for another 18 months on top of that.
Waterstraat lays out what to expect once you are unemployed. “Within 14 days of the layoff, the employer or health plan administrator must provide a written election notice to the laid-off employee of their COBRA rights, helping them understand COBRA coverage so that they can make an informed decision about whether to enroll,” he says.
The benefit of COBRA is that you get to keep your coverage that you had while working. The downside is unlike when you are working, it is often more expensive due to your premiums no longer being subsidized by your employer.
This means you may have to do a basic cost analysis of COBRA versus an outside policy. But when you do this cost analysis, you need to think of your health plan holistically.
“For those that had a high-deductible health plan (HDHP) and already met most or all of their deductible for the year before being laid off, COBRA could be the best option because their out-of-pocket costs for qualified medical expenses for the rest of the year will be greatly reduced and under many plans $0,” explain Waterstraat. “If they don’t elect COBRA, they may need to start over with a new plan and a new deductible.”
Obtain an outside policy
Another viable option is simply to go and obtain outside coverage. This may be a more cost-effective option. But you need to remember that time is of the essence and you need to move quickly.
“For those who choose not to enroll in COBRA and never pay any of the premiums for it, the loss of group coverage triggers a special enrollment period on their state health insurance marketplace through the Affordable Care Act,” explains Waterstraat. “This gives them 60 days to enroll in a marketplace plan, even if it’s outside the normal open enrollment period.”
If going on the exchange seems daunting, you can also choose to work with a health care broker. Often times, there are consultants that can help you examine a number of plans in order to find the right coverage. They are usually paid by the insurance company once they sell a policy.
One of the benefits of looking for an outside policy is that you can try to find the right combination of coverage and cost. For example, you may want to have similar coverage to what you had while employed in the event you contract Covid-19 or another catastrophic illness. However, to help with your costs, you may want that plan to be a high deductible. This can save you money while you are out of work.
Keep in mind there is no one size fits all approach. That is why working with a health broker can help mitigate some of the risks in choosing a policy.
Coverage is a necessity
Ultimately the most important thing is to have health care coverage in a pandemic. Once you are laid off or furloughed, maintaining coverage should be a top priority. You need to be on the lookout for your COBRA materials and consider all costs. Hopefully, for many Americans, this will be a short-term issue and that you will be employed again shortly and covered by a health care plan.