Don’t Lose Your Health Insurance With Your Job! (the Original Post)

(Please note, my only qualifications for the following post are experience as The HR department at my husband and my web design and development firm).

So you just got laid off or you’ve quit, and you’re looking for health insurance, maybe just for you, or maybe for your whole family.

What?  You’re not looking to stay insured? Please, please, please, don’t be an idiot.  Stay insured.  You may not have needed your health insurance much in the past, but Murphy’s Law states as soon as you aren’t insured you’re going to be hit by a bus.  No, I mean it.  It’s happened to some of my other self employed colleagues (o.k., it was a car that hit John, but you get my drift).

So maybe the reason you think you shouldn’t stay insured is because your COBRA payment is going to be $800 a month. (Don’t have COBRA, keep reading anyway, I’ll get to it).

Wait, wait, who said you should stick with COBRA?  Oh, yeah, people like the health correspondents on NPR.  No offense to NPR’s hosts, but they work for National Public Radio, a wee island of socialism in the vast capitalist sea that is the U.S.A.  At least when it comes to small businesses, and people buying health insurance independently, they don’t seem to know much.

Unless you have a pre-existing condition you should only stick with COBRA until you find a private health insurance plan.

Believe it or not, if you go with a High Deductible Health Care Plan (HDHP) for a middle aged guy of 35, private health insurance can be around $75 a month — even with such well known companies as Humana and Blue Cross Blue Sheild when you live in the city of Chicago (very expensive health insurance here!)  A good place to start when you look for instant health insurance quotes is eHealthInsurance, but I notice that some of their prices are actually HIGHER than what we are paying.  I would call the individual company before signing up for anything through eHealth.

What, you say?  High Deductible Health Care Plan?  I can’t afford a $5,000 deductible.

Who said $5,000 deductible?  But o.k., we’ll say you did for the sake of argument (but remember, lots of high deductible plans offer much smaller deductibles, some as low as $1150, but their monthly premiums are higher).

Maybe you can’t afford a $5,000 deductible. But think about it, if you get hit by the proverbial bus (or come down with cancer), you may have bills that go well and above $100K.  You can arrange financing for your $5K deductible if you can’t pay it right away (many hospitals offer very low cost financing arrangements…and the fact that you are insured is going to keep them busy processing your paperwork so that you can negotiate for this lower rate when your pain killers wear off).   …Or you could also arrange financing for the whole amount of that $100K treatment -  or maybe its ONLY $15 K (umm…”ONLY” bit is sarcasm).

What if you or someone on your plan has a pre-existing condition?

Then keep them on COBRA, but look into getting other members of your family on a private plan.  (If you are the main insuree you may have to remain on coverage to keep the person with a pre-existing condition insured, but call your COBRA provider to verify).

What if you don’t have COBRA…or…What do you do when COBRA runs out if you or someone in your family has a pre-existing condition?

HIPAA is your friend.  It’s something President Clinton created, it covers a whole mess of different provisions laws, etc., but the one you have to be concerned about basically says states have to have some sort of coverage for people who exhaust their COBRA coverage or whose employers do not offer COBRA.  Like COBRA, it isn’t (always) cheap, but at least in my state, Illinois, it is fairly reliable.  How do you find it in your state?  Well if you live in Illinois go to ICHIP.  Other states.  Ugh…some are a nightmare.  Google HIPAA  + your state and cross your fingers.  If you don’t find what you’re looking for you might try this site: http://www.naic.org/state_web_map.htm

Pay for your deductible tax free.

O.K., there are a couple of ways you can do this if you don’t have employer sponsored health insurance.

  1. If you are self employed you can basically deduct all qualified medical expenses (pdf) from earned income–including premiums.  The fancy name for it is a “Health Reimbursement Arrangement”.  Remember, if you’re working for money, even if you aren’t collecting a W-2, or the jobs are too small to even qualify for a 1099 — even if its just babysitting your sisters kids, you’re self employed (but remember you have to declare the income for it to be tax deductible).
  2. If you are not self employed you are allowed to deduct all qualified medical expenses above 7.5% of your income.  So if you make $50,000 and have medical expenses of $8000 then you can deduct $4,250 ($8000-($50,000*.075)=$4,250)).  (Note: I don’t know if premiums for health insurance count towards the 7.5%.)
  3. You can get an Health Savings Account (HSA) for your medical expenses along with the HDHP.

Whew!
That’s way to long for a first post, and I’m terribly sorry it was dry.  This stuff is.  Just wait for the exciting post on Health Reimbursement Arrangements vs. Health Savings Accounts!