Insurance for the Young and Unemployed

Help! I’m unemployed. Can I still keep health insurance?

Hi Dad,
As you know, I’ve recently been laid off.  I’m really worried about health insurance because the government Cobra plan seems expensive.  Since I’m under 26, is there anything else I can do?  If so, could you walk me through the general process?


Dear Daughter,

You are certainly not alone in your predicament and you are fortunate (though you may not feel it) to have options that would not have been open to you a generation ago – or even a year ago.

COBRA: Consolidated Omnibus Reconciliation Act of 1985

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) mandates, among other things, that workers have the ability to continue medical insurance coverage after they leave employment. This is a vast improvement over the previous situation, in which once you left your employer, you also left your group insurance and you were on your own.  And while it was an improvement for many people, it provides only that coverage be available, not that it be reasonably priced. For most people, not only do they have to pay what they previously contributed as an employee, they also have to pay whatever their employer contributed (which can vary widely). Plus, the may need to pay up to 2% more than the coverage to cover administrative costs. The idea was that you could stay in the group plan but you wouldn’t incur any cost for your former employer.

Getting coverage at a group rate is way better than having to buy individual coverage, but boy that 102% can still taste bitter.

Obama – Care: Patient Protection and Afforable Care Act of 2010

Now, the Patient Protection and Affordable Care Act of 2010 (a.k.a., PPACA, ACA, Health Reform or Obama-care) adds another arrow to your health care survival quiver.

One of its many provisions is that dependents (children) will be permitted to remain on their parents’ insurance plan until their 26th birthday, and regulations implemented under the Act include dependents that no longer live with their parents, are not a dependent on a parent’s tax return, are no longer a student, or are married.

How to change back to your parents’ health insurance.

Regaining coverage under a parent’s plan is not too difficult. The loss of coverage for an eligible covered dependent is a “Qualified Change in Status” which allows for a change in plan coverage that is appropriate to the triggering event. I am allowed to increase the level of coverage (the number of people covered) to include you, but I wouldn’t be allowed to change the medical plan in which I’m enrolled. I just needed to provide proof that you were coming from another plan. That proof comes in the form of a HIPAA (Health Insurance Portability and Accountability Act) Certificate which your old employer is required to provide in pretty short order after your separation. They could also require proof of your age (usually in the form of a birth certificate). Then I just re-enroll through my HR department with you as an added dependent. Easy peasy.

For those that meet the criteria, it can be a significantly lower cost option. In some cases this is just cost shifting without actually making coverage any more available. In your example, the cost of your coverage shifts from you (under COBRA at 102% of premium) to my employer (a self insured company that has to pay claims). In the end, that will increase their overall insurance costs which will be passed on to premium payers – that’s me.

Others may be able to shift from expensive individual plans to their parent’s plans. Still others, who can’t afford an individual plan and who aren’t eligible for COBRA, may have a window of opportunity to get some cheaper coverage – provided Mom and Dad have coverage and they haven’t reached age 26.

Does recent Health Care Reform really help the country in the long run?

If you indulge me one moment of soap-box editorial – this whole thing doesn’t help as many people as you might think and it does absolutely nothing to improve the cost, quality or overall availability of health care. Providing health insurance is not the same as providing health care. It just queues up more paying customers to the insurance companies and does little to relieve the financial burden on anybody.  Americans need to purge themselves of the notion that all it costs to go to the doctor is their $20 co-pay. Only then will they start being smart consumers of health care. And only that will drive prices down.

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