Financial Samurai

Whether you are unemployed by choice or due to unfortunate circumstance, having health insurance is a must. According to The American Journal Of Medicine, 62% of all bankruptcies in 2007 were health related and that’s before the economic meltdown. What’s more frightening is that back in 2001, health related bankruptcies were “only” 45% of total. The epidemic is growing!

Say what you will about Universal Healthcare, with a nation as rich as ours going bankrupt at the rate of 62% due to health expenses is an absolute travesty. Genetics and a drunk driver hitting you while crossing the street doesn’t discriminate between rich and poor. So why should one die while another lives when all it takes is money to save a life?

In 2009 roughly 2.3 million people were unemployed for longer than six months. By June 2012, the ranks of the long-term jobless soared more than 100 percent to 5.3 million. The employment market is thankfully recovering with a rise in corporate profits, but we are still at levels much higher than the natural rate of full employment.

You do not want to be unemployed AND uninsured. You’ve already lost your steady paycheck. The last thing you want is to have a medical disaster that wipes out your savings, emergency fund, and retirement funds. If you lose everything while unemployed, it will be brutally difficult to rebuild. You might very well enter a cycle of poverty and never get out.

AFFORDABLE HEALTH INSURANCE OPTIONS

* Employer Sponsored Healthcare (COBRA): After you leave your company, you usually get COBRA if your firm has more than 20 employees and is using health insurance as a tax deduction. COBRA refers to the Consolidated Budget Reconciliation Act of 1985, and specifically to Title X of the Act. Title X states that an employer must provide the same health care coverage at the same group rate for a certain period of time at the employee’s expense if an employee leaves.

It’s important to understand that COBRA is by default not free. COBRA is simply giving the ex-employee the optionality of paying the same health insurance premiums while the employee was working for up to 18 months. Many employees have no idea how many months of COBRA they can get, so make sure you ask. COBRA premiums are also negotiable as I’ve written in my book on how to negotiate a severance package. In my case, I was able to ask for six months premiums fully paid.

COBRA is the easiest health insurance option for those who no longer have jobs. Your healthcare provider network of doctors is the same so you don’t have to look for new people or fill out any additional paperwork. The goal of COBRA is to allow a healthcare safety net until an employee finds a new job. The typical COBRA policy lasts for one to six months before the ex-employee is on their own.

* Spousal Health Insurance Plan: If you are lucky to be married or have a long-time partner after you’ve lost your job, the first thing to do is ask your spouse to ask HR or the benefits department about how you can join your spouse’s plan. One husband who was paying $400 a month in health insurance premiums at his old firm was added to his wife’s plan for only an additional $100 a month. One can say getting laid off actually saved the couple $300 a month.

If you are married, it’s best to do a three scenario cost analysis: 1) The cost of having your own separate plans with your respective employers, 2) The cost of spouse X on spouse Y’s plan, and 3) The cost of spouse Y on spouse X’s plan. As my above example demonstrates, the married couple would have been much better off if the husband was on his wife’s plan for the past seven years to the tune of $25,200 in health insurance premium savings! Of course there’s more to a plan than just money. We all have our own doctors and specialists we like in various locations.

For those of you who are not technically married and one of you loses his/her job, there’s also hope as well. There’s a concept called “common-law marriage” that is contracted in nine states (Alabama, Colorado, Kansas, Rhode Island, South Carolina, Iowa, Montana, Utah and Texas) and the District of Columbia. New Hampshire recognizes common-law marriage for purposes of probate only, and Utah recognizes common-law marriages only if they have been validated by a court or administrative order. The point of common-law is to provide protection for one spouse who may be at a tremendous financial disadvantage of the couple separates. If you live in one of these nine states, check with a local attorney or ask your HR department about your rights.

From an employer’s perspective, adding a spouse to an existing employee’s health insurance package is a marginal financial burden. Think about how little it costs to add another driver’s name to your car insurance policy for example. The car insurance premium cost only goes up by 10-20%. One of my interviewees for my book highlighted that he got on his partner’s health insurance plan for free after his COBRA ran out. All his partner did was mention to HR that he has been living with her for 10 years and would like to include him during open enrollment. Every employer is different. You just have to understand your employer’s policies by asking.

* Parental Health Insurance: Thanks to The Affordable Care Act, young adults up to age 26 are allowed to remain or join their parent’s or guardian’s health plan. The U.S. Department of Health and Human Services estimates that approximately 2.37 million young adults will be affected by the new law, out of which 1.83 million are currently uninsured. For more information about The Affordable Care Act, here is a helpful Q&A page from the Department Of Labor.

To provide some perspective, approximately 30 percent of Americans between the ages of 19 and 29 have no health insurance. This age group makes up 13 million of the 47 million Americans currently living without health insurance.

* Leveraging The Internet: Let’s say your COBRA has run out, you don’t have a spouse or domestic partner, you’re 26 years old and you still haven’t found a job that will provide health insurance. Don’t worry. The internet has been a boon for consumers because it allows us to find more efficiently find the cheapest options. The best place you can find the best online quotes is via eHealthInsurance. They have been around since 1997 and are situated right here in the San Francisco Bay Area. They are the nation’s first internet-based health insurance policy company and has the #1 marketshare. They are licensed in all 50 US states and partner with over 180 health insurance companies to find you the best rate. I’ve actually personally met a couple of their agents before.

When I was working, I paid roughly $350 a month in health insurance premiums for a UHC Basic, Rx co-pay plan. The firm contributed another $400 for my group health insurance plan based on the documents I received after I left. Hence, my automatic assumption was that I would have to pay AT LEAST $750 a month in equivalent health insurance premiums once I became unemployed. I say “at least” because firms get discounts for group plans vs. individuals. It’s the same concept of buying in bulk.

My health insurance plan was pretty good. I had medical PPO with a $25 co-pay program that covered 90% of my entire bill. In other words, if my doctor’s bill was for $1,500 to fix my leg, I would pay $25 + $150. As I’m pretty active in sports and outdoor activities, it was important to get a plan that provided at least the majority of coverage. That said, I also have the finances to be able to cover most disaster scenarios if I need to. I just don’t want to pay out of pocket for anything that costs more than $3,000. Figure out your own threshold if you have not done so already.

I checked the quotes with eHealthInsurance and found a plan as cheap as $105 a month for 80% coverage of my entire bill (co-insurance). The only caveat is a $2,000 a year. In other words, I have to pay out of pocket for my first $2,000 in co-pay and medical expenses before health insurance kicks in. Given I feel comfortable paying up to $3,000, this combination of $105/month and a $2,000 deductible sounds good. The main thing I’m worried about is disaster insurance that costs tens or hundreds of thousands of dollars.

There are literally hundreds of health insurance plan combos on eHealthInsurance to choose from. You just have to figure out what you are comfortable affording on a monthly basis and how much you can afford if something bad happens.

DON’T TAKE ANY CHANCES 

When I was employed, all I would ever hear from colleagues and politicians was the crippling cost of health insurance skyrocketing multiple times faster than inflation. As a result, I read every single page of my employee benefits handbook, interviewed dozens of people who left their job, spoke to HR, and searched the internet for options. What I’ve hopefully demonstrated in this post is that there are affordable health insurance options for anybody who no longer works.

It is vital we all have at least disaster prevention health insurance because we never know when bad luck will strike. If you are unemployed not by choice, please don’t risk not having any health insurance to save $100 a month. Remember, more than 62% of bankruptcies are health related. Being unemployed and uninsured is one thing. Being bankrupt and unhealthy is a path towards potential for the rest of your life.

If you’re looking for health insurance, take a minute to search eHealthInsurance for free health insurance price comparisons for individuals and families to find out what’s most suitable for you.

Photo: Restless in Warnemunde, 2012, SD.

Regards,

Sam