Cheap Health Insurance Options For The Unemployed, Self-Employed, Or Early Retiree

Restless In Warnemunde Germany

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.com. 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. They have the largest health insurance network online and are much more efficient than the Affordable Care Act through healthcare.gov.

Photo: Restless in Warnemunde, 2012, SD.

Regards,

Sam

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. says

    Happy to be reading this post from Canada this morning. Encourage your government to offer universal health care.

    I will have to consider long term care insurance when I get in to my 50s. That is a fairly new concept in Canada.

  2. says

    I was literally dealing with this issue this week! My health insurance had lapsed and I was looking for a new one. Being self-employed I have to find it on my own…being an adjunct professor has it’s perks, healthcare is not one of them. So I went to all the big boy type firms looking for some kind of self-employment group pool to try to jump into. I used the eHealthInsurance link and I have to say it honestly helped point me in the right direction. I am so glad that headache is over!! It would be so much easier if a college just picked me up for tenure track haha!!

  3. says

    The one time I didn’t have health insurance I got a super bad flu virus. I tried to just get better on my own but my fever wouldn’t break and I had to bite the bullet to go see a doctor and get antibiotics. It was expensive but I was too sick not to go.

    I like ehealthinsurance because they have so many plans to choose from at all prices and they have support 24/7. A lot of self employed entrpreneurs use them to have emergency coverage which is usually just $100 or less a month. I have a friend who got hit by a car recently which goes to show we just don’t know when we could end up in the hospital and how even a little insurance can go a long way.

    • says

      Doesn’t that always happen? Murphy’s law! Yeah, $100 a month is NOTHING. I would think most people who make $30,000 a year or more can comfortably afford this premium. With Obamacare, I assume the system will take care of the millions who don’t have or can’t afford.

  4. says

    62%?? That’s just crazy and it speaks volumes about the state…or lack thereof here in the States. Having health insurance was the last and major hurdle before we decided to take the plunge last year. Having three little ones, it was not an option to me to go without coverage. We have a good friend who is an insurance broker basically and he was able to get us into contact with someone who could help us out. We ended up getting a plan that was only $25 more per month that what we were paying for my portion at my previous employer. Not half bad when I was expecting much worse.

    • says

      It is crazy. I watched a 60 minute episode where a factory worker, retail worker, and ex model all went bankrupt and are sleeping in either their cars or a homeless shelter b/c of health issues they could not afford to treat. A travesty.

      $25 more per month is nothing. That’s what eHealthInsurance does. They find the best rates of plans most suitable to one’s needs just like a broker.

  5. says

    I just wanted to point out that under COBRA, you have an 18-month safety net by law. If you live in California, CAL COBRA extends that to a total of 36 months (each state is different). This is usually not the cheapest coverage, but it is guaranteed, so it’s worth carrying until you find your own coverage. After that, HIPAA guarantees that you will be offered insurance (even with pre-exhisting conditions) as long as you never let your coverage lapse. You don’t get as many choices, (in California it is each insurer’s top 3 plans that must be offered) but at least you have a guarantee of coverage. Again, it’s guaranteed but not guaranteed to be reasonably priced. I found individual policies (with a high deductible) to be MUCH more cost-effective.

    The key is never let your coverage lapse, otherwise HIPAA doesn’t apply and you may not be able to get coverage.

  6. says

    Although I did not become a teacher for the benefits, I do like the insurance. It even gets better in retirement. If I were uninsured, I would probably want protection for the big expenses and just deal with the occasional doctor visit and prescriptions. One way to reduce health insurance is taking a higher deductible unless you know you need an operation.

    • says

      Yep. $2,000 deductible for a $105/month plan is what I found online. So cheap and protects from disaster insurance. I didn’t take the plan, but in my research I’ve found so many options online that aren’t financially onerous at all.

  7. says

    If you choose a high deductible plan, I think getting an HSA eligible plan is a no brainer. For the tax savings alone, it usually makes up for the small difference in premiums if there even is a difference. My daughter and I have the option of joining my husband’s group plan for $500 a month, but our HSA individual plan is only $190 a month. We pay if we go to the doctor, but by using HSA money, it’s like getting at least a 25% discount.

  8. squasher55 says

    I just plugged in a hypothetical case into eHealth Insurance. Only hypothetical because we do not need it right now, but we might in a few years. My wife is younger than me, and I am well over 65. So…..the health insurance answers that came up all said the same thing: they would not offer insurance to a spouse who was over 65. WOW! A little background….I do not qualify for medicare, as I have never worked in the USA. We both have dual CAN & US citizenship. Right now I am covered on my wife’s employer insurance, so we do not have a problem. We may have to return to Canada down the road, just for health insurance reasons. That would not be our first choice. Does anyone have any experience with this problem?

  9. says

    I went through this when I was laid off last year as well. Currently on COBRA, but found that the next best thing for me would have been to sign up for group coverage under my college alumni program. I could also get the same rates via either of the professional associations I’m a member of.

    It wasn’t a huge discount, but it was cheaper than going direct to the insurers.

  10. says

    Sam, I agree with you that health insurance is a necessity or vital for every family. We cannot predict our future health condition or what will happen to our family members’ health tomorrow.

    Having health insurance helps the family to get access with the right medical care, right Sam?

  11. Bob says

    Sam – how much are you paying for things up to your 2k deductable limit? My understanding is that a lot of doctors/hospitals/dentists etc charge people without insurance more than they actually get paid by the big insurance firms. eg doctor bills $1000 for procedure X – the uninsured pay $1000, the insurance companies say “we’ll pay you $600 for that”. Does the low cost/higher-deductable plan get you the negotiated rates?

    Thanks for the article – nice to hear these costs might not be quite as bad as widely believed.

  12. truth finder says

    I like reading your blog. I rarely have an opposite opinion. But this time I do. I am self employed and I am in my mid 20s. I’ve always been healthy. I’ve decided for the past year to go without insurance. The reason is because I work in the industry and know the prices are inflated. You can pay for a lot of things with cash.
    http://www.truecostofhealthcare.org/summary
    Also, I recommend you do a search on that “study”. Maybe google search medical bankruptcy, myth. You will find that a lot of the people in this study had less than a few thousand bucks in their account. What really is a travesty is not that there are so many medical bankruptcies, but that so many people cannot save up for emergencies.

    • says

      Please explain more. You work in the healthcare industry and opted out of health care insurance? Why exactly?

      It would seem imprudent to not get at least disaster insurance. We all feel great until we don’t. Nobody plans to get sick.

  13. says

    This depends on your state. I was in a state (won’t say which one but it had the 2nd highest premiums in the country) and when I have to pay our own insurance it nearly killed us. Know the laws in your state and it will lead to informed decision making.

  14. Dave says

    A few years ago, right out of college I was working at a company on contract but without benefits. As a healthy 22 year old, of course, health insurance wasn’t a big priority. Why would I need that? Well a few months later, I cut my fingers on some broken glass and needed 17 stitches. At least it happened at work, so the contract company paid the bill from the emergency room. By the following week, I had enrolled in a short term (6 mo.) health insurance policy and before that term was up, I was hired on full-time at the company with benefits.

    Some lessons are learned the hard way, and I have the scars to remind me of that.

  15. says

    Seeing as how I just joined the ranks of the unemployed, I’m going t bookmark this and refer back to it often! Thanks Mr FS!

  16. Tony says

    Here in NJ I was unable to find ANYTHING for a family of 4 under 1k a month (and that was extreme high deductible). Since I am leaving my job soon, I found a company that I could do consulting work for no pay but…wait for it…JUST health insurance! I will work for them for about 5 hours a week. I gotta write a blog post about this one…

    Take care, Sam.

    • says

      Hmmm, so basically you will work for 25 hours for 1.25 months worth of health insurance that equates to $1,000? I guess that’s not THAT bad if that’s what it takes. Seems like the employer is getting the much better end of the deal though as health insurance is deductible.

  17. Ken says

    I’m self-employed and my wife starts a new teaching job in a few days. The new job provides $415/month toward health insurance. So if we get insured through her employer or if we insure through a private plan she still gets the $415, also that amount is static and not based on the monthly premium. But, through her employer it’s $375 for her but $600 for her and myself on her plan. We already pay for accident insurance since we both mountain bike, snowboard, hike, etc. Will we be able to find a plan under $415 for both of us privately? I’m 31 and she’s 28 if it matters.

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