How to Find Affordable Health Coverage When Laid Off

Find Health Insurance When You’re Laid Off. YinYang/iStockphoto

If you have been laid off or if your company is closing, you may be worried about losing your employer-based benefits, particularly health insurance. Having no health insurance can be a frightening experience, especially if your employer health plan provides coverage for your family. Also, you may be most concerned if you or a family member has a chronic illness that requires frequent visits with your doctor or the need for expensive prescription medications.

It is important to try and find some type of health insurance plan during your period of unemployment. If you or a family member seeks care without health insurance coverage, you’ll be stuck paying the entire bill. You may be taking an unnecessary financial risk by not having health insurance. While going without health insurance may seem cost-effective when you have no or less income, it may not be! The leading cause of personal bankruptcy in the United States is illness and medical bills.

Fortunately, if you are handed a pink slip, you have a number of options to remain insured for some period of time following your layoff.

Spouse or Partner Health Insurance

Getting health insurance through your spouse’s (or domestic partner’s) employer may be your most cost-effective option. Many employer health insurance plans allow their employees to add family members who have been laid off – your spouse can add you to her/his plan.

If your job provided the health insurance for the entire family, your spouse can initiate coverage for the family.

Most health insurance plans provided by large companies have “special enrollment” provisions that allow the immediate addition of a family member without having to wait for the annual enrollment period.

If you are able to use your spouse’s health insurance, make sure to apply within 30 days of being laid off—some health insurance plans may not automatically accept you for immediate coverage or may limit coverage for a preexisting medical condition if you wait for more than 30 days.


If your former employer has 20 or more employees, the company is required by a 1986 federal law to offer you the option to pay for an extension of your health insurance coverage for at least 18 months. This law is known as COBRA, which stands for Consolidated Omnibus Budget Reconciliation Act.

At the time you are laid off, your employer must inform you in writing about your rights under COBRA. You then have 60 days from the date of the notice or the date your health insurance ended to enroll or sign up for coverage under COBRA. If your company went out of business or went bankrupt, COBRA will not be available.

When you sign up for COBRA, you will continue to have similar health insurance and the same health plan benefits that you had while employed.

However, you must pay the health insurance premium that your former employer was paying for you. The employer may also add a 2% administrative fee.

Depending on your individual circumstances, COBRA can be very expensive. If you are getting coverage for yourself, you may have to pay up to $400 per month; family coverage may be more than $1000 per month. These amounts will vary depending on the benefits provided by your employer’s health plan.

$1,000 every month is a lot of money and probably more than you expected to pay, especially if you also lost your income and are collecting unemployment insurance. For some workers, the COBRA payments can amount to more than 60 to 70 percent of their monthly unemployment check. Many laid-off workers who are eligible to continue their health insurance coverage through COBRA cannot afford to do so.

If you cannot afford COBRA, there may be other health insurance options that will provide the health coverage benefits that you need for you and your family.

COBRA is regulated by the U.S. Department of Labor. The department’s website has a list of frequently asked questions about COBRA. You also can call 866-444-3272 for information or assistance.

Note: COBRA will not change with the passage of the health reform legislation

Private Health Insurance

You can buy health insurance directly from a health insurance company, such as Blue Cross, or through an insurance agent who represents an insurance company. In most states, you can buy health insurance online from reliable organizations (such as eHealthInsurance). You should consider consulting with a licensed insurance agent (this may be the same agent who handles your auto and homeowners insurance) who may be able to help you find a health insurance plan that is less expensive than COBRA and still fits your needs.

You can easily compare premiums and health benefits online. Health insurance companies vary in what type of health plans they offer and by shopping around you may be able to save money. For example:

  • John Skillset, age 36, was laid-off from a middle management position at an investment banking firm. His family coverage through COBRA is $1150 per month. He was able to get adequate coverage for his family from a not-for-profit insurance company for $785 per month. Although this plan requires that he pay for the first $3000 of medical expenses (the deductible), his family is healthy and has had low medical costs in the past.
  • Jenny Techwhiz, age 24, was laid off during a downsizing at a computer software company. Her individual coverage through COBRA is $370 per month. She was able to find a special plan from Blue Cross for people ages 18-26 for $280 per month.

You also may be able to save money by purchasing group health insurance through an association such as a professional or trade organization, college alumni association, a fraternal organization, club membership, or a religious group. Health plans provided by these groups are generally less expensive than individual health insurance coverage.

Health Reform Legislation Changes

The Patient Protection and Affordable Care Act signed into law in March 2010 addresses access to health insurance coverage and assures that all Americans who need coverage will be able to get health insurance.

Starting in 2014, you will be able to purchase health insurance in a health insurance exchange that will be available in all states. At that time, health insurance companies will not be allowed to impose any pre-existing condition limitations.

One of the hallmarks of the health reform legislation is the elimination of pre-existing condition requirements imposed by health plans. Effective September 2010, children (below age 19) with pre-existing conditions may not be denied access to their parents' health plan and insurance companies will no longer be allowed to insure a child, but exclude treatments for that child's pre-existing condition. Starting in 2014, this provision will apply to adults as well.

Short-Term Health Insurance Coverage

Short-term health insurance policies, also known as gap insurance or temporary insurance, are designed to provide you with some level of health coverage for a specific period of time, usually six months to a year. Many of these plans cover health-related emergencies, including hospital stays, and medications for acute medical conditions.

Although these plans may be less expensive than regular health insurance, they have a number of important limitations, including no coverage for pre-existing conditions and routine health care, and high deductibles and out-of-pocket expenses.

There is also no guarantee that you can renew the plan after your initial coverage period.

A short-term health insurance policy may be appropriate for you if you have a healthy lifestyle, have no existing medical conditions, and expect to be reemployed or able to purchase regular health insurance before the end of the temporary coverage period.

Low-Cost or Free Options

If your income has dropped significantly and you cannot afford to buy health insurance, you may be eligible for a local, state, or federal program. A good place to start looking for information is the website of the Foundation for Health Coverage Education. This not-for-profit organization provides interactive tools to help you find affordable health insurance or alternative options in your state. The site also provides access to an Uninsured Hot Line (800-234-1317) that allows you speak to a live operator any time-24 hours a day, 7 days a week.

If you do not have any health insurance options, there are places you can go for low-cost coverage or free care. These options include:

  • State-sponsored High-Risk Pools: Go online or call your state's insurance department or consumer services department and find out if your state has a high-risk pool that allows residents to purchase low-cost health insurance. Your state insurance department may also be able to advise you about your options if you cannot afford health insurance.
  • Children's Insurance: If your family income is below a certain level, your children (under age 19) may be eligible for a free or low-cost health insurance policy. These policies, provided by the federal government and your state, cover all basic children's health services including dental and vision care. For information, contact your state's Department of Health or Department of Children and Family Services. You can learn more about this type of health insurance and access your individual state's program at InsureKidsNow!
  • Community Health Centers: Regulated by the federal government, community health centers can be found in many parts of the country. These clinics provide care to people without health insurance and have sliding fee scales based on income. Many of these clinics have counseling services to help people find health insurance or low-cost care. Find a health center in your community.
  • Free Clinics: These clinics, located in many communities, provide health care for free or very little cost to uninsured people. They are often staffed by volunteer physicians and nurses and depend on donations from the local community. Find a free clinic in your community.
  • Veterans Benefits: The Department of Veterans Administration (VA) offers free or low-cost medical care and prescription drug coverage to eligible veterans through its VA medical facilities. The VA website has information about eligibility and location of VA offices.

Take Care of Yourself

Losing your job, your income, and your health benefits can be very stressful and, for many people, a blow to their self-esteem. One of the most important things you should do is take care of yourself!

There are steps you can take to help you through this time:

  • Be proactive about finding health insurance coverage as well as looking for a new job
  • Stay connected with family and friends
  • Find a local support group of others who have been laid-off
  • Talk to your doctor about your layoff and health insurance situation. She may be able to suggest some cost-saving measures such as switching your brand-name medications to generic versions or working out a payment plan for your medical bills.

And, most important, maintain a healthy lifestyle with regular exercise and good eating habits! You'll feel better and you are less likely to need health services!

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