Keeping insurance after quitting your job

March 25, 2005 4:29 PM

My girlfriend is planning to quit her job shortly, but needs to have continual health insurance.

We don't want to go bankrupt because of a serious illness during a break in coverage and we don't want her to be declined for insurance because of preexisting conditions. How do we continue her coverage? We live in Arizona and her employer is a small business. I do not yet have insurance through my employer.

posted by Optimus Chyme to work & money (15 comments total)

If she is being offered health insurance right now, the only option might be buying COBRA Coverage from their current insurance agency. You say it's a smally business, though. If they had less than 20 employees for 50% of last year, they do not have to offer it.

Unless she has a pre-existing condition, I would avoid it, as they make you pay full price for the insurance, and that is very expensive.
posted by bryanzera at 4:33 PM on March 25, 2005

You can find policies online through ehealthinsurance.com. It worked for me for a brief time a few years ago between two policies. The most affordable plans through the web site won't cover preexisting conditions, but it should do fine at keeping your girlfriend covered temporarily.

She can also do a COBRA. I don't remember what the initials stand for, but as I understand it federal law requires your girlfriend's current insurance company to let her stay on the plan for a certain period of time, as long as she is willing to pay the full cost of coverage (including the part covered by her employer right now). If you call the current insurance company, they should be able to give you info on how a COBRA would work.

On preview: bryanzera knows more than I do about COBRAs, obviously.
posted by croutonsupafreak at 4:37 PM on March 25, 2005

If COBRA is not applicable I would suggest you find out who the larger insurers are in the State (probably one of the Blue(s) affiliated plans), go to their web site, and find a "high deductible" plan and go for it. It will require you to fork out the first 2-5K and it will cover all/part of additional expenses--the out of pocket may hurt but it will keep you out of bankruptcy--good luck. You might also find an HSA (Health Saving Account) which is a combination high deductible health insurance plan and pre-tax flexible spending account--
posted by rmhsinc at 4:53 PM on March 25, 2005

I've been on COBRA and on individual plans as well as group plans. I have pre-existing conditions, and I've had to transfer my health insurance between states, so I can say with some knowledge that keeping yourself insured when you're not getting coverage through an employer is a scary, byzantine system to say the least.

The easiest way to accomplish this is to take COBRA if it's an option. COBRA is simply the extension of her current group coverage, but at full cost to her. (Actually, she'll pay 102% of the cost, I believe -- the extra bit is tacked on for "administrative costs.") Because health premiums have been rising steadily for individuals and employers over the past several years, expect it to be pricey. Five years ago, I paid about $200/month for my COBRA coverage from my then-employer; it would cost me close to $400/mo. to keep my coverage from my current employer if I were to leave.

She can also attempt to gain individual coverage on the open market. But beware! Pre-existing conditions can make such coverage also highly expensive. Also -- and this is important -- sometimes you can only qualify for certain individual plans after your COBRA has run out. That is to say, if COBRA's available, she must elect to take it, then wait till it runs out (usually 18 months) to be eligible for certain individual plans. That is, if your girlfriend indeed has the option to take COBRA and were to decline, then some individual plans would automatically be off-limits to her because of it. (If she doesn't have the option to take COBRA, of course, then the question is moot.) This is just one of the lovely loopholes the insurance companies came up with in response to the HIPAA legislation of 1996.

As an alternative way to get group coverage, she might qualify if she's a member of various professional associations -- sometimes they offer plans for their members. I considered getting insurance through a couple of editors/freelancers associations, but those have gotten extremely expensive in the past couple of years as well.

Also, there's a scary 63-day limit she'll want to keep in mind. If her coverage lapses for more than 63 days and then she gets hired by an employer who also offers insurace, her new group plan does not have to overlook any pre-existing conditions. That is, if she becomes eligible for new insurance with continuous coverage (or a less-than-63-day lapse), the new group insurance plan MUST take her, regardless of pre-existing conditions. If it's been more than 63 days since she had coverage, the new group plan is free to decline coverage for a certain period of time, whether entirely or just in relation to her condition. (For example, say she has a thyroid condition. If she goes without insurance for more than 63 days, the new group insurance plan has the right to say "we won't take you at all for X months" or "we'll take you, but we won't pay for any visits to an endocrinologist or for any thyroid meds for X months.")

Sorry for the long post, but it's an incredibly complicated system with a truly staggering array of rules, loopholes, and limits designed to make the average consumer throw up their hands in despair.
posted by scody at 5:02 PM on March 25, 2005

stuff about the 63-day limit

This is good. She has several job offers from other companies right now, but they probably would not insure her the first day. Is the 63 day thing federal or state law? Can I find it online?
posted by Optimus Chyme at 5:19 PM on March 25, 2005

The 63-day rule is definitely federal (it's part of HIPAA). And you're right, most companies won't let her go straight into their health plan on day 1 -- it's often a 90-day waiting period (though that can vary company to company) before a new employee is allowed to enroll. In cases like this, COBRA (when it's an option) can be the easiest way (though not necessarily cheapest) to get through the interim.

Alternatively, there are insurance companies that offer short-term/temporary plans -- often in 3-month or 6-month increments -- for this very type of situation. The ehealthinsurance link upthread might have some further specific plans to investigate. (I've never been on a temporary plan, so I don't know about affordability relative to COBRA or regular individual plans, though.)
posted by scody at 5:35 PM on March 25, 2005

Never, Never, Never, Never, Ever, find yourself without health insurance. If you get sick without out insurance it could bankrupt or kill you. COBRA is the easiest but is expensive. When I went on to to more school after undergrad I had a catastrophic coverage by a company called Golden Rule that had a $5,000 deductible. Basically, it covered me for cancer or falling off of a mountain. However, since I was in school I had access to their facilities for routine medical care. Still, even without the school clinic such plans are cheap and protect you in case the worst befalls you. If your GF cannot afford COBRA long term she should get at the very least a catastrophic coverage plan. In the meantime she should not go without coverage and the easiest way to make sure is to pay for a month of COBRA until she gets the other coverage.
posted by caddis at 6:18 PM on March 25, 2005

I am going through the hassle of dealing with COBRA right now, so I'll just tell you a few steps that I have to deal with.

1. I have to get an official letter from my employer stating what my last day of work is and what my COBRA rates are. This has to be in a very specific format.

2. I have to take this letter and the agreement letter that my boss has to send with it [basically a form with how much I have to pay filled in, in my case it's $412/mo or something] and reapply for my same health insurance. This is sort of BS because I can't do any of the things you could do if you were really applying for heaslth insurance like change your doctor or whatever. I have, I believe 45 days to do this

3. Once I am "re-applied" I have to send my old boss a check every month before their premiums are due, for the full amount of my premiums, and pray that they will not flake out. This means continuing legal entanglements with my current, soon-to-be-former workplace which I do not relish at all. Assuming this all goes well, I can keep doing this for 18 months [which, for those of you keeping track at home, is about seven grand]

Vermont has a sort of state COBRA option which you can get as an alternate to federal COBRA. It's only for six months and doesn't include the extra 2% service fee and is pretty much only good if you work someplace that is too small to have to give you COBRA. I don't know if your state has that. I do know that e-health insurance doesn't have a single policy available in my area, I type in my zip code and they just say "sorry" I wish you and your girlfriend the best of luck.
posted by jessamyn at 6:25 PM on March 25, 2005

They can't charge you 120% of a monthly premium for COBRA (they can only charge you up to 2% above the cost of the premium).

COBRA is an excellent deal if you need more than catostrophic coverage or have a pre-existing condition. Because you have up to 60 days after you are given your COBRA letter to accept or reject coverage, definitely price other plans but make sure you are comparing apples to apples. What are deductibles? What are the out-of-pocket limits? Copayments? Exclusions?

If you need a primer on health insurance plans, check out this overview.

If you elect COBRA, know that you can discontinue it at any time. So, if you elect it, you are not automatically locked into 18 months of payment. You pay month by month. If you skip a payment, they drop your coverage.

p.s. COBRA stands for Consolidated Omnibus Budget Reconciliation Act of 1985. I used to administer benefits for a couple of Fortune 500 companies. Let me know if you have any technical questions about group health plans. I can't guide you on individual plans as I have no experience with those.
posted by jeanmari at 9:31 PM on March 25, 2005

One more thing...occassionally professional associations and/or alumni associations offer individuals the chance to purchase group health insurance through them. Check into this option if it is available.
posted by jeanmari at 9:34 PM on March 25, 2005

Ah...yet another thing. If she has a pre-existing condition or is plans on getting specific treatment before she is covered under a new employer's plan, it is an easier transition (and often better coverage) to take COBRA.

Because of the Health Insurance Portability and Accountability Act, you can be covered from Day 1 under a new health plan for a pre-existing condition as long as you have been insured the previous 12 months.

This means that if you remain insured for 12 months or more, you will be able to go from one job to another, and your pre–existing condition will be covered–without additional waiting periods–even if you have a chronic illness.

Scenario: Say you have your COBRA letter. It is dated March 31st--this is also the day that your coverage ended. You want to wait before deciding to elect coverage because you have 60 days to make up your mind. So you put the letter in a drawer. THEN! (Heaven forbid) you have appendicitis on April 15th. But you haven't sent in a response to your COBRA letter! That's okay.

As long as you send that letter in before May 30th (the 60 day deadline) WITH the premium payments for coverage since March 31st, you are covered. You can't start paying as of April 15th...you have to pick up the premiums from your last day of coverage in order for coverage to be effective. But it does give you that 60 days of "float" time.
posted by jeanmari at 9:50 PM on March 25, 2005 [1 favorite]

Thanks for all the information, guys. I love AskMe and I should mark all these answers as best.

I'm worried that her boss won't let her get COBRA, though, because he is small and petty. But there's still a lot of good data here. Thanks!
posted by Optimus Chyme at 7:29 AM on March 26, 2005

OC, one thing about COBRA is that it's the law, either her boss is required to provide it or he isn't based on how big his company is and some other stuff. I was worried about this with my boss for other reasons but I was very straightforward [asked HR first if employees were eligible for COBRA and then, called my health insurance to figure out step by step how it was supposed to work, have my boss a very detailed explanation and then kept the pressure on to make sure she followed through] check your state laws and general COBRA eligibility requirements and know what your rights are before your girlfriend has the talk with the boss.

jeanmari, thanks for that explanation, I was wondering how that was all supposed to work with the 60 day wait period. Is my employer supposed to be paying my premiums in the meantime if it takes me 60 days to decide, or is no one paying them?
posted by jessamyn at 8:18 AM on March 26, 2005

And you're right, most companies won't let her go straight into their health plan on day 1

*boggle* Every employer I've ever had has covered me from my first day of employment. Who are these companies that don't?
posted by kindall at 9:28 AM on March 26, 2005

jessamyn--

the law requires COBRA to cover you retroactively as long as you pay your premium retroactively. the company doesn't pay the premium for the 60 day period, but a health care company will keep your data in the system.

The employer is legally required to send you a COBRA letter with specific information about COBRA. (They also must keep a log of COBRA letters that they send to ex-employees if they ever are audited.) The "60 day clock" is supposed to begin either a) when you leave, or b) the day you receive the letter...whichever comes LAST. Check the date on the letter when you receive it, though, because that is when the company usually starts their clock.

(p.s. Kindall...the day when a company extends benefits usually is dependent on their generousity and the amount of turnover they experience. The white collar companies I've worked for usually make benefits effective on the first of the month following your date of hire. But I did work in management for a high turnover hotel that used to make new employees wait a year for benefits (!) This was before pre-existing conditions were the norm and it was to keep pregnant women from starting work, getting the birth paid for, and then leaving their job. Ah, the 1980's. Section 89, ERISA, COBRA, FMLA...I miss the crazy benefit days.)
posted by jeanmari at 6:24 PM on March 26, 2005