Health Insurance for the Unemployed

by Kevin Mulligan

A majority of people are honest, hard working folks that want to work. Not many people enjoy sitting on the couch, aimlessly clicking on job applications and sending their resumes off to a proverbial hiring black hole.

Health insurance for unemployed workersWe want to work, but sometimes the company lays off, or the funding gets cut, or the performance is too low. No matter how you become unemployed, the impact can be financially catastrophic. Not only have you lost your income, but you now have eliminated your health insurance. Even for healthy unemployed workers, having health insurance is critical.

Where Can I Get Health Insurance If I’m Unemployed?

If you find yourself in the unemployment line, what options do you have for health insurance? Here are a few to consider.

COBRA Coverage

The easiest option is to continue using the health insurance you had while you were employed. Thanks to COBRA coverage — or the coverage provided by the Consolidated Omnibus Budget Reconciliation Act — you may continue with your old health insurance for 18 months after you are terminated from your job.

Unfortunately, this can be an expensive option. While you were employed you enjoyed having part of your health insurance being subsidized by your employer. Without that subsidy you now pay the full cost of the insurance. That means your premiums can jump to over $1,000 easily.

However, if you can afford COBRA because you have an emergency fund it can be extremely useful because you get to stay with your current set of in-network doctors. The price can be worth it if you expect to be employed again soon.

Independent Individual or Family Policy

If the cost of your COBRA coverage is too much for you to bear, consider buying an individual health insurance policy from an insurer directly. Many of these plans are available from major insurance firms like Blue Cross Blue Shield, United Health, and CIGNA. Learn more about shopping for an individual health plan.

There are a multitude of options based on your state and which insurer you are talking to. One option to look for is called a High Deductible Health Plan. These plans have lower premiums, but higher deductibles. It is just like buying auto insurance: the higher the deductible, the lower your premium is. This coverage is also sometimes called catastrophic coverage because you are essentially self-insured up to $1,200 (for individuals) or $2,400 (for families) before insurance kicks in. If something catastrophic were to happen to you the insurance kicks in only after you have paid a significant deductible.

Having a high deductible seems risky, but when you are unemployed it can help keep your premiums down to a more affordable range. If something horrible happens to you and you end up with medical bills in the tens of thousands of dollars range, paying $1,200 or $2,400 in deductible will be well worth it.

State Coverage

You can also seek out help from your state with something called CHIP or Children’s Health Insurance Program. These programs vary by state but usually provide coverage for uninsured children. Whether or not you can pair this insurance up with an independent policy will depend on the program you qualify for, but it is a way to get coverage for your kids when you can’t afford coverage for yourself.

Many states also offer high risk insurance pools (see list). The Patient Protection and Affordable Care Act also calls for state health insurance exchanges, though these will not be completely online until 2014.

Final Thoughts

No matter your situation, do whatever you can to avoid going without health insurance. You cannot control when you will get seriously ill or in an accident. All it takes is one accident to destroy your finances for a long time with sky high medical bills that you cannot pay. Sacrificing to get minimal coverage is better than going without coverage at all. And you might consider using COBRA coverage for a month or two while you figure out your other options — although you’ll pay for it, it is better than needing insurance before you make a decision on which direction to go.

If you’re employed and reading this, you might consider bumping up your emergency fund. It never hurts to have extra cash in the bank to help you pay for medical insurance during unemployment.

Published or updated July 27, 2012.
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{ 3 comments… read them below or add one }

1 Kurt @ Money Counselor

Sadly, there are no good options for health insurance if you’re laid off. That’s one of the reasons medical cost is the #1 reason for bankruptcy in the US. COBRA? Just when your income is slashed, you’re faced with the prospect of adding a huge monthly expense to your budget. Most families must choose between rent/mortgage, car payment, food, utilities, and health insurance. What would you do? Drop health insurance, of course. Sure, the unemployed can apply for private health insurance. The premium will be huge, impossible for middle class families to squeeze into a budget already constrained by loss of income. And if anyone in the family has a potentially expensive illness, you’ll be rejected. Your best option may be to move to Canada!


2 Ryan Guina

Kurt, I agree, affordable health insurance is one of the biggest problems facing our nation today. Unfortunately, affordable health insurance is primarily tied to employer group health care in the US, which makes it difficult to find affordable health care when someone loses his or her job, or even when they want to buck the trend and go for self-employment. Hopefully the new Affordable Care act will help smooth things out a little bit. Affordable health insurance will benefit millions of people, and even help spur entrepreneurship and allow people to make life decisions that aren’t tied to employment. In the mean time, people have to do what they can, which is why we put together this article.


3 Mike

Here in NJ, the individual plans can sometimes be the same or less than the group premiums but they are still very high. The issue is that now, there are no employer contributions. Unfortunatley I don’t think this can be fixed unless they did full universal healthcare which at this point looks unlikely.


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