Hanging Onto Health Coverage in Tough Times

Updated April 1, 2009.

As the recession tightens its grip, a growing number of Americans are finding themselves unemployed — and uninsured.

For each percentage-point increase in the unemployment rate (February's rate reached 8.1%), another 1.1 million people lose their health coverage, according to research by health policy nonprofit Kaiser Family Foundation. (Considering that the unemployment rate is up three percentage points since this time last year, that's a large pool of people hoping not to get sick.)

For those who don’t have access to a spouse’s health insurance plan, shopping around for independent coverage can cause some serious sticker shock — especially if you're accustomed to an employer shouldering the lion's share of your health premiums.

Navigating the complicated health-care landscape can also be daunting, but don't give up. “Definitely do not go without health insurance. People can rack up thousands of dollars in medical bills [without coverage]. It’s a risk not worth taking,” says Sally Greenberg, executive director of the National Consumers League, a consumer advocacy group.

Here's how the uninsured can regain coverage — and possibly cut some costs while they're at it.

Retain Coverage Through Cobra

If you work at a company with more than 20 employees and lose your job, then you can extend your health coverage through Cobra for up to 18 months.

The great thing about Cobra coverage is that your health plan will offer the same coverage and any pre-existing medical conditions will have no bearing on your ability to obtain coverage (like it would with a private health insurance plan). The biggest drawback: its prohibitive cost. Monthly premiums average $400 for single plans and $1,078 for family coverage, according to a 2007 study by eHealthInsurance, an online insurance marketplace. But the stimulus bill will help reduce those costs by providing a 65% subsidy for laid-off workers who pay for Cobra. Those eligible will pay just 35% of the premiums (that brings the consumer’s contribution down to an average $140 and $377 a month, respectively). The subsidy is available to workers who lose their jobs between Sept. 1, 2008, and Dec. 31, 2009, and is limited to nine months.

You can also take steps to lower your future financial burden if you think your job – or company – is on shaky ground. During your employer's open-enrollment period, you can shift to a lower-cost plan at work. That way, if you need Cobra coverage later on, your premiums will be lower. It’s still going to be expensive, but moving from a PPO to a less-pricey HMO now could end up saving you a chunk of change each month, says Sam Gibbs, spokesman for eHealthInsurance.

Note: To be eligible for Cobra, workers must have been enrolled in their employer's health plan when they worked and the plan must continue to be in effect for active employees. That means if your company declared bankruptcy and is liquidating its assets, it will likely terminate its health plans, thereby making Cobra unavailable.

Shop Around for Private Health Insurance

If you’ve exhausted your Cobra coverage or simply don't qualify for it, start shopping for an individual plan. Just keep in mind that private health-insurance policies can get pricey and may not always offer comprehensive coverage, says Jennifer Tolbert, principal policy analyst at Kaiser. “The premium you can afford, but it might come with a $2,000 deductible,” she says.

Coverage in the private market is usually based on health status. So a pre-existing condition like asthma or a family history of diabetes can be reason enough for an insurer to raise premiums. But if you’re relatively young and healthy, a low-premium, high-deductible plan might be right for you. Prospective buyers should consider the plan’s monthly premium (which are usually lower when the deductible is high) and the co-pay amount. Also, make sure any policy you're considering covers the services you use most (say, prescription drugs) or ones you expect to use in the near future (like maternity care), says Gibbs.

To compare features and costs of available health plans, check your state’s health insurance department’s web site, eHealthInsurance.com, or the web sites of big insurers like Aetna (AET) and UnitedHealth Group (UNH). (Read our story on help with cutting drug costs.)

Turn to Associations and Professional Groups

If you're a card-carrying member of organizations like your state’s bar association or a freelancer group, you may be in luck. Many professional and trade groups and even alumni associations offer group-based health plans at a discount. Under these plans, the health risk is spread across the group, so members’ premiums tend to be a little bit lower than if they bought a policy on their own. Just be prepared to pay more than you did for your employer-based insurance since you're paying the full premium, says Tolbert.

Negotiate With Medical Providers

Prices are not always set in stone. If you need to see an eye specialist or undergo a procedure that’s not covered by your plan, it’s possible to negotiate a lower price with your doctor or hospital, says Alan Sager, health policy professor at Boston University. You'll probably have the best luck by going to your nearest public hospital, which often have open-door policies and charge on a sliding scale based on need, says Sager. If negotiating a lower price doesn't work, ask if you can be put on a payment plan.