Tips & Guides
Health Insurance Considerations for Job Seekers
While health insurance may not be a top consideration for individuals in the job market, the health care decisions made during the job search period can have a long-term effect on your personal finances as well as your health if not properly planned. The period during a job search is likely to involve a number of moving pieces, and balancing those obligations requires a coordinated effort on your part. Your health, and the health of your family members, should be important considerations in the event that you find yourself without long-term health coverage during the time of your job search. These considerations are addressed in this high level primer on the health insurance options available to job seekers who may be changing employers or are in-between jobs.
How Does Changing Jobs Impact Your Health Coverage?
The American health care system is unique from other industrialized nations in that the U.S. is predominantly an employer-based health insurance system. According to the U.S. Census, 59.3% of Americans received health insurance coverage through their employers in 2007. As such, changing jobs will in many cases mean not just a change in your employer, but also a change in manner by which you receive health coverage benefits. If your job search has resulted or will result in a change in health coverage currently received, you will have some options as to how to provide health insurance during the transition period. If you previously received health insurance from your employer, the primary short-term option would be to continue the health insurance coverage under COBRA (at your own cost). Additionally, you could consider a longer-term solution to find coverage under a private-market Individual/Family health insurance plan. While going without health insurance is a last-resort option, every effort should be make to avoid not having health insurance coverage for any length of time. If the alternative is to otherwise go uninsured (which is strong recommended against), a second short-term alternative is to enroll in a less-comprehensive but more affordable short-term health plan.
(Note: There are considerations to enrolling in a short-term health plan as are not considered “creditable coverage” under HIPAA regulations, which could potentially have an adverse affect the pre-existing condition exclusion periods when enrolling under a new group plan in the future.)
Risks of Being Uninsured
While the term “health insurance” has become synonymous with the term “health coverage”, health insurance in the truest sense of the word offers the insured financial protection against the expense of major medical coverage. A 2001 study by Health Affairs determined that half of personal bankruptcies in the U.S. are medically-related. The study also found that medical debtors were 42% more likely than other debtors to experience lapses in health coverage (note: This is also because medical debtors are usually uninsurable). Health insurance at the most basic level provides “protection” against major medical bills. While it is preferable to have a plan that provides comprehensive medical benefits such as covering the costs of doctor’s visits or prescription drugs, the coverage that matters most during a transition period is protection against major medical costs.
Filling the Coverage Gap
Gaps in health coverage typically result due to either a period of unemployment, or due to a statutory waiting period when entering into a group health insurance plan offered by your new employer. In the event of any gaps in health insurance, there are multiple health insurance options (assuming that you do not qualify for public health insurance program):
1. Coverage under a family member’s plan
2. COBRA insurance
3. Short-term health insurance (if COBRA or longer-term plans are not an option)
4. Individual/Family health insurance
The first consideration is whether you are eligible for coverage under a parent’s or spouse’s health insurance plan. Receiving coverage under a family member’s existing plan is preferable, although there are still economic considerations in the cases that dependents must buy into coverage. Given that this option is not available to the majority of job-seekers, and because the steps are more self-explanatory in this option, this primer does not spend much time on this alternative. In addition, if the family member’s health plan is through an employer, adding new family members can only be done once a year during the group plan open enrollment period.
COBRA Health Insurance
Short for the Consolidated Omnibus Budget Reconciliation Act of 1985), COBRA plans provide continuing coverage for qualified workers, their spouses, and their dependent children when they leave their employer. By law, former employees may be eligible for COBRA coverage from their previous employer for up to a set time period as determined on a state-by-state basis. The benefit of this kind of plan is that COBRA provides the least disruption to an individual’s or family’s existing coverage. The disadvantage is that the COBRA plan may be unaffordable given the need for the individual to pay insurance premiums on top of any co-payments.
Short-Term Health Insurance
Short-term health insurance plans provide basic level coverage with generally more affordable premiums than under a COBRA plan or a new individual/family health plan. Short-term plans involve a fixed period of time, usually 6 month to one year. The advantage of a short-term plan is that they are typically easy to understand, easy to enroll and more affordable than traditional health insurance premiums. However, the downside is that short-term insurance plans do no cover the same variety of visits, tests, or procedures as would a COBRA or individual/family plan, and they have a set expiration date. Short-term plans can be viewed as “protection” against major medical expenses during a time period in which the individual or family is between more comprehensive health insurance coverage. Another important consideration before choosing a short-term health plan is that they are not typically considered creditable coverage under federal HIPAA regulations. This could create a gap in your continuous coverage that could later affect pre-existing condition exclusionary periods when you enroll in a group health insurance plan at a later date. If you are currently uninsured, this would be irrelevant and a short-term health plan could be your best consideration.
Private Market Health Insurance
While not a “short-term” solution, job-seekers may also consider enrolling in a more permanent Individual/Family plan. A growing number of Americans are opting for private-market Individual/Family plans to avoid having their health insurance benefits tied to their current or future employment.
After You Land the Job
After finding a job, there are still important health insurance considerations. Some of these considerations are outlined below:
1. Does the new employer offer health insurance benefits?
If the new employer does not offer health coverage and the employee does not otherwise have health insurance coverage, he or she may need to consider private market individual and family health insurance plans. Because these plans provide long-term coverage and vary widely in terms of costs, coverage, and benefits, employees in this situation should be as informed as possible about the available choices in the private market.
2. If yes, should I take health coverage if I need to buy into the plan?
Group health insurance premiums are generally more affordable than private-market Individual/Family health insurance premiums because of the ability of the group to “pool” risks and expenses. However, finding individual/family health insurance quotes is free and you will have more available options from which to choose. It could be worthwhile to explore your private market options before choosing the employer-based plan.
Another consideration in opting out of employer-based coverage is that private market Individual and family health insurance is guaranteed renewable. This is not the case with many employer-based coverage. In other words, if any family members develop a medical condition that requires ongoing treatment and you are receiving employer-based health coverage, your family members’ health coverage will be tied to your length of employment. When you leave this job, it will be much more difficult to find future health insurance coverage for what will then become a “pre-existing condition”. If instead you were to enroll in an Individual/Family plan, each family member would remain covered for the term of the membership (subject to maximum lifetime benefits restrictions). Some employers, in lieu of your enrolling in the group health plan, may offer an allowance if you purchase your own private health plan.
3. When does coverage begin?
If the new employer does offer health insurance coverage, but there is a mandatory waiting period from the date of hire until coverage begins, the employee may want to consider a short-term health plan to `the employee may also be eligible for COBRA coverage from the previous employer during this waiting period.
4. Which family members should I cover under the plan?
If the new employer is paying for 100% of the family’s health insurance premium, it may make financial sense to move family members to the group plan in order to save on your personal finances. However, if you will be required to pay for your dependent’s premiums under the group policy, which is most common, then it may make more sense to keep family members on their existing plans.