The Insurance Buying Guide: If You Leave Your Job
If you have health insurance through your employer and you leave the job, odds are you can keep this coverage for a time. Under the Consolidated Omnibus Budget Reconciliation Act, or COBRA, which is part of a federal law enacted in 1986, you have the right to keep your coverage at group rates if you lose your group health insurance because of a reduction in your hours of employment or because you leave or lose your job -- unless you are fired for gross misconduct. You also have the right to continue coverage for your spouse and any dependents.
COBRA only applies, however, to employers with 20 or more employees, 50 percent of the time during the preceding period.
How long you can keep this coverage depends on your particular "qualifying event" -- that is, dying, being fired, quitting. If you were fired (for anything other than gross misconduct, in which case, you don't qualify at all), you, your spouse and dependent children are entitled to 18 months of continuous coverage. Any other qualifying event entitles you to up to 36 months of coverage, if you decide to pay for it.
When your COBRA coverage is going to run out (assuming you haven't taken another job in the interim that provides group health insurance), you can apply to the insurance company for conversion from COBRA to an individual policy -- but you must do so within 31 days of termination of COBRA. The company is not obligated to provide you with an individual policy, however, if they only sell group insurance.
Your former employer will not keep paying for your health insurance. You'll have to start picking up the tab. The company can charge you 102 percent of what the coverage under the group plan actually costs (the extra 2 percent is to cover administrative costs). But rest assured that this amount is almost always less than what you would pay if you purchased your own individual coverage -- and it is often substantially less.
By law, your employer is required to let you know about COBRA and what steps you must take to retain your health insurance coverage. Your employer also will break down the costs for various coverages you may have, so you can choose to continue all or only some of them -- for instance, you may decide to keep your HMO coverage but give up your vision and dental plan.
The Health Insurance Portability and Accountability Act of 1996 also made a few changes to the provisions of COBRA, which became effective January 1, 1997. Now, newborn and newly adopted children of people who have COBRA coverage automatically qualify for the coverage, as long as you enroll them within 30 days of the adoption or birth. In addition, a disabled COBRA beneficiary is eligible for 11 additional months of coverage if he or she was determined to have been disabled under Social Security at the time of the qualifying event or at any time during the first 60 days of continuation. This is true, as long as the disabled individual notifies the plan administrator of his or her disability status within 60 days of the determination and within the first 18 months of continuation.
If your COBRA coverage is about to expire and you anticipate getting another job that provides health insurance soon, you may want to consider a temporary insurance policy. This sort of coverage is fairly limited, but it will protect you from any catastrophic medical expenses. It usually will have a deductible, then will reimburse you for a percentage of your costs. Some plans will reimburse you on a percentage basis up to a set amount (sometimes $5,000), then pay 100 percent of your costs above that threshold.
A temporary medical policy will pay typical hospitalization costs -- but only for procedures that are medically necessary, at rates that are usual and customary -- as well as recovery costs, including time in a nursing home or in-home visits from a registered nurse. It often will not pay for any condition you had during the 24 months prior to the start date of the policy, or for any self-inflicted injuries or anything that might be covered by workers' compensation insurance (that is, job-related injuries or illnesses).
Also excluded are coverage for injuries incurred in a war (you should be covered by the military, if you're serving or by the Veterans Administration), dental treatment, routine physicals and immunizations, routine pediatric care of a newborn child, normal pregnancy or childbirth, sterilization (or the reversal of sterilization), mental illness, alcoholism or drug abuse, prescription drugs and medications that you get when you are not confined to a hospital, treatment outside the United States -- and the list goes on.
In addition, if you purchase 120 days' worth of temporary medical coverage and get a job in 30 days, the temporary insurance cannot be cancelled. (Ordinarily, if you had some other sort of medical insurance, you could get a refund -- less administrative expenses -- for the unused portion.
However, bear in mind that there is probably a probation period with your new employer, during which you are not eligible for the company's medical plan. So, a temporary policy to protect you in case of a medical catastrophe during that period may be worth the money.
