6 Big Mistakes to Avoid When Unemployed and Looking for Health Insurance
As the economic fallout of the COVID-19 coronavirus continues to claim jobs across America, millions are suddenly finding themselves without employer-sponsored health insurance at a time when they may need it most. The latest figures show that 20.5 million jobs were lost in April 2020 alone, bringing the nationwide unemployment rate to 14.7 percent.
If you’re among those affected by coronavirus-related job loss, here are 6 common mistakes to avoid when it comes to exploring health insurance options for yourself and your family:
1. Don’t automatically enroll in COBRA: Why? Because COBRA coverage can be really expensive.
COBRA is the federal law allowing you to temporarily continue coverage under your employer-sponsored health plan at your own expense after being laid off. You won’t be eligible for COBRA if your employer went out of business, but if you qualify you’ll have 60 days to enroll.
COBRA is an important option for some, but it’s notoriously expensive. Think of it this way: when you had employer-sponsored coverage, your employer likely paid 50-100% of your monthly premium, but now you’ll pay the full premium yourself under COBRA. Use the 60-day window to look into other coverage options; you might find one that covers the benefits you need at a more affordable price.
2. Don’t forget to review your ACA coverage options: Why? Because Affordable Care Act (ACA) health plans are probably your best avenue to coverage.
The ACA is the law governing individual or family health insurance plans you might purchase on your own. If you’ve had employer-sponsored coverage a long time, this may be a new experience for you, but it’s not hard to research your options and enroll on your own.
Most people can only enroll in ACA plans during the fall open enrollment period, but losing your employer coverage gives you with a 60-day special enrollment window allowing you to sign up for an ACA plan. You can learn more about your ACA coverage options through licensed online health insurance agents like eHealth or the government-run ACA marketplace in your state.
3. Don’t overlook federal subsidies if you’re eligible: Why? Because subsidies can potentially save you lots of money.
Some ACA plans can be purchased with the help of federal subsidies that reduce how much you’ll pay towards your monthly premium, making coverage significantly more affordable. Eligibility for these subsidies is based on your income.
Though rules can vary by state, most people with an annual household income of less than 400% of the federal poverty level (about $51,000 for a single person or $105,000 for a family of four) will qualify for subsidies.
A job loss can radically decrease your income for 2020, making you eligible for a subsidy. But remember that if you end up earning more than you anticipated, you’ll need to reconcile the subsidy dollars you received with what you were actually eligible for when you do your 2020 tax return.
4. Don’t automatically pick the lowest-premium plan: Why? Because deductibles and other out-of-pocket costs are just as important.
The first thing most people see when shopping for a new health plan is the monthly premium – that’s what you pay to keep your coverage in effect. If you’ve just had a loss of income, it’s understandable that you might be price conscious. But the cheapest premium plan isn’t always the best one for your budget, since lower-premium plans tend to come with higher deductibles.
If you have a chronic medical condition or use prescription drugs on an ongoing basis, you may actually save money overall by choosing a plan with a somewhat higher monthly premium but a more affordable deductible.
When shopping for coverage online, some websites (like eHealth.com) will let you enter your Rx needs to see which plans cover them most affordably.
5. Don’t enroll in a catastrophic plan if you’re eligible for subsidies: Why? Because subsidies can’t be used toward catastrophic plans, so you could end up paying more for less coverage.
Special ACA catastrophic plans are available for young people under the age of 30 and those who qualify for a hardship exemption. These plans come with lower monthly premiums and so may be a temptation for people on a tight income. You should know, however, that these plans often come with higher out-of-pocket costs if you get sick.
What’s more, you cannot use federal premium subsidies toward the purchase of a catastrophic health insurance plan. If you qualify for those subsidies, you may save money by enrolling in a standard bronze or silver-level ACA plan with lower out-of-pocket costs.
6. Don’t go totally uninsured if avoidable: Why? Because it could make a time of financial hardship even more difficult.
Monthly health insurance premiums may feel like an unjustifiable expense when you’re out of work, but health insurance can help protect your financial future at a time when your finances are fragile. Without it, an unforeseen accident or hospitalization can quickly lead to bankruptcy.
To learn more about your options, talk with a licensed health insurance agent who represents a broad range of insurers and can help you enroll in an ACA plan and subsidies, or point you in the right direction if you qualify for Medicaid. It never costs anything extra to work through an agent, and personal help and advice can go a long way in tough times.