Unemployment Health Insurance

One of the most painful parts of losing a job is having to deal with replacing your health insurance. Most people feel unprepared to select and enrolling in this type of health insurance even though most of us will have a handful of interruptions in employer-provided health insurance over our full working career. Employer-provided health insurance expires on the last day of the month of termination of employment. Enrollment in an unemployment health insurance is never automatic and must be addressed within a short time after termination of employment.

Types of coverage

While unemployment compensation is provided through the government, unemployment health insurance is provided through commercial health insurance companies. The term "unemployment health insurance" is generic and therefore may refer to one of several available insurance programs. Some people who work for larger companies have the option of continuing their same health insurance for up to 18 months by paying the full cost of this coverage plus an administrative fee. This is commonly known as COBRA coverage. In some cases a similar program called "individual conversion coverage" is available. In either case the burden of enrollment and full payment of premiums is solely the responsibility of the terminated employee. Despite the obvious advantages in simplicity and continuity of coverage, few people can afford this option.

The most popular type of unemployment health insurance is short term major medical insurance. Despite the name, this insurance can span several years or longer and eligibility requirements are minimal¹. This insurance offers flexibility with high coverage limits. Policies can be renewed month-to-month from one month to six or twelve months. The two most important features of this coverage are that it is valid with all doctors and hospitals in the U.S. (no network required) and it provides a Certificate of Creditable Coverage² to be used with your next employer's health insurance policy. This is important because it ensures that the new coverage immediately takes over the cost of treating pre-existing medical conditions.

Specialty insurance can be used in specific situations and regular individual major medical insurance is suitable when it is unlikely that there will be other employment in the future and the applicant is financially stable.

Shopping Tips

Plan to enroll in a bare-bones coverage rather than a fully loaded policy. Most people avoid incurring voluntary medical expenses while they are not employed so this insurance is primarily designed to cover large unexpected medical expenses. Also, because of the uncertainty of unemployment, it is smart to select an insurance that is less expensive than you think you can afford.

Short term medical insurance is priced at about 1/3 of the cost of your former insurance or COBRA option. For a typical employee, this means that the total cost of the unemployment health insurance will be approximately the same as the amount you were contributing to the employer's health plan through salary-deductions³. Using his guideline, it may be psychologically comforting and aid in your personal financial planning to know that the total out-of-pocket cost of health insurance remains relatively constant from the period of employment to the period of unemployment.

All of the following insurance products provide strong protection against catastrophic losses and provide a Certificate of Creditable Coverage to ensure payment for pre-existing medical conditions on your next employer-provided health insurance plan. The price of the coverage varies and some products are better suited for specific situations. We suggest narrowing the list to two or three choices and then get online quotes for each product.

Use the online enrollment options available. This is faster and safer than a paper application and offers immediate confirmation of coverage.

Insurance Choices

All of the following choices are available a MedSave.com. They are grouped according to price range although price varies from one person to another based on location of residence, age, and sex.

Lowest cost unemployment policies - Celtic Insurance STM and UnitedHealthOne Golden Rule Insurance STM are often the least expensive insurance plans to cover a gap in group health insurance. Some of these plans keep cost down by using a "per cause" deductible rather than a single policy deductible.

Mid-range unemployment policies - Secure 3x12 (36 month) short term medical insurance, and Health Savings Account qualified health insurance for long term coverage.

Higher priced unemployment policies - Blue Cross, Aetna, Cigna, CelticCare

Special Situations

When specific medical conditions or circumstances exist then additional sources should be checked to determine the best coverage options. The special situations are: 1) when significant medical conditions, including diabetes, high blood pressure or high cholesterol exists, 2) applicant is a resident of MA, NJ, NY or VT, 3)non-US citizens, 4) residing in the U.S. les than a year, 5) previously declined for health insurance coverage, 6) applicant is overweight or 7) coverage is needed outside of the U.S. In all of these cases, see the article titles "Short Term Medical Insurance for Special Situations".

Individual help in selecting the best value insurance is available through OnlineAdviser at onlineadviser@medsave.com.

Footnotes

¹ See the article "Am I Eligible for Short Term Medical Insurance" and "How Long Can I Be Covered by Short Term Medical Insurance" for details.

² See the article "Understanding a Certificate of Creditable Coverage" for more information.

³ This assumes that the average employee contribution for employer-provided coverage is about 40% of the total cost.

Recession impacts health insurance

An artice in Time (November 13, 2008) predicts that the number of uninsured Americans will rise sharply to above 50 million within the next few months. This pessimistic prediction assumes that many employers will drop their group health plans to combat the recession by the end of the 2008 calendar year and that many of these individuals will not obtain alternate health insurance on their own. The prediction also assumes that employers would drop health coverage altogether rather than switch to one of the low cost limited beneft plans now available. We see no reason to support these assumptions.

The number of uninsureds has actually decreased slightly over the past two years as more affordable insurance plans have been introduced to the market according to our "Covering the Unisured: 2008 Update" report. The cost of employer provided health insurance coverage for an employee without dependents is about $6,000 per year and COBRA coverage cost slightly more. But the cost of individually purchased short term medical insurance averages only about $1,800 per year. About 72% of Americans currently qualify for this type of low cost short term medical insurance. (Short term medical insurance is not available to the residents of four states or individuals with serious pre-existing medical conditions).

Given this viable and affordable alternate coverage possibility, it seems unlikely that more than an additional four million people would choose to go without any health insurance in 2009.

Golden Rule Web site temporarily closed for maintenance

Golden Rule Insurance Company, a national leader in innovative low cost health insurance, announced that its "E-store" will be closed for system maintenance over the weekend of Friday October 17, 2008 and will reopen at 8:00AM eastern time on Monday October 20. While direct self-serve online quoting, enrollment and some other functions may still be available during this weekend, MedSave.com will postpone customer service requests until Monday when all online functions are available to provide full enrollment support.

Golden Rule Insurance provides low cost short term medical insurance as well as a line of affordable long term renewable insurance policies for individuals and families in most states. See www.MedSave.com/goldenrule for more information.

Why are short term insurance rates falling?

With health care costs rising sharply, why are so many short term medical insurance plans lowering rates? The latest rate reduction was announced at MedSave.com by HPA Inc., the administraors for Secure STM, including the "3x12" 36 month short term medical plan and the new "Secure Lite" lower cost short term medical insurance.

In an inflaionary environment, rate decreases are usually triggered by a drop in medical care utilization. Evaluating utilization trends in health plans is a complicated topic even for those who have access to the best data. We don't; we are just speculating. Just for the sake of discussion, let's assume that utilization has declined in short term medical insurance in recent years. Why would that be?

The easiest explanation is the increase in policy deductible. The median policy deductible selected by buyers increased from $500 a few years ago to $1000 today. The largest increase in policy deductibles chosen is in the $2500 deductible option.

A person who is healthy enough to meet underwriting standards is unlikely to incur substantial medical expenses in excess of $1000 within the 3-4 month average lifespan of a short term medical insurance policy. Of course some do, and they are the reason that insurance is important. But a larger number of people simply do not incur a claim on the policy that exceeds a $1000 deductible.

Another explanation is that people are actually waiting for group insurance to kick in after the STM before going to the doctor. That makes sense and is the behavior we would expect. Perhaps we will eventually find that fewer people are using STM as a substitute for regular health insurance. Those people might have gravitated to limited benefit and other types of low cost health insurance.

CT will offer coverage to high risk small businesses

Connecticut’s latest health insurance bill has now passed the state Senate and is expected to be signed by the Governor. The approval vote came late last night and today’s news is filled with praise for the “outstanding accomplishments” of the legislators. The new bill presents an entirely different approach to health insurance reform.

The law allows local municipal government employees and small businesses to join the state employee’s health insurance pool. Premiums are already about $2,000 per month for family coverage, (vs. a national average of about $1,200 for comparable coverage in large firms). Certainly this is not what we consider “affordable” but this is apparently far less than some CT municipalities are now paying for health insurance! Few small businesses could afford this coverage. Those that could foot the bill will cover only the owners or key employees. There is no economic reason to suggest that small businesses would use the plan to cover rank and file employees. Small businesses tend to pay far less for employee health benefits than larger firms and municipal governments.

The problem is that those who understand insurance principles realize that adverse selection under the new law will now drive the premium rates up in a spiral effect. That is ALWAYS the economic effect of opening up a guaranteed issue health plan to additional applicants on a voluntary basis. The state will now be effectively subsidizing the health care costs of local municipalities and the rlativley few affluent small business owners who have significant medical costs. The first may be commendable – but who would have expected the second result? Eventually the cost of coverage under this Connecticut insurance plan will be HIGHER than any other state's employee cost but LOWER than any other high risk insurance pool. It will be a highly effective method to distribute health care costs of a few among all the state's taxpayers.

Open enrollment health insurance pools are certainly not a new concept. This is the approach used in most states to cover high risk individuals despite the clear indications that those who need the insurance most can not afford it. Most states use open enrollment health insurance pools as a "last resort" coverage under federal HIPAA law for those who cannot find more afordable coverage. Connecticut's plan to combine the open enrollment plan with the taxpayer-funded state employees' health coverage is an interesting new approach.

Is the single payer issue dead?

The tide of public opinion about our nation’s health care woes has taken a sharp turn over the past two months. The movement to blame commercial health insurance – as exemplified in Michael Moore’s “Sicko” movie - has lost wind. While the health care problems remain exactly the same as before, fewer people are willing to blame health insurance companies. We still pay way too much for health care for less than ideal care. The prognosis remains that the problem will get worse before it gets better. But apparently we are beginning to realize that commercial health insurance system is more likely to be part of the solution rather than the root cause of the problem.

Support for an open market commercial competition in the health care business has increased. Most of the current legislative proposals for health care reform on a national and state level now incorporate the use of private health insurance companies.

Those who endorse a government controlled single payer health care system are outraged. Socialist-minded reformers have noticed the change and express frustration in many online publications this week. Some Americans hope for a single payer government-controlled health care system. One blogger titled his column “What’s Going On?” and expressed disgust with the sudden trend toward his state politician’s recent endorsement of commercial health insurance solutions. Another lawmaker in Oklahoma defended himself from attacks by health care reformers by taking a hard stance that proposed measures to expand coverage would simply be too expensive to justify the support of his constituents. On a national level, McCain’s health care proposals, previously regarded are tired and boring, are applauded by mainstream media this week.

So why are we seeing this sudden change in direction? Much of the change in attitude is attributable to the explosion of myths surrounding commercial health insurance. Three of the most popular myths about commercial health insurance companies are:
1 - The profits of health insurance companies boost our overall health care costs.
2 - Private insurance is more expensive than public insurance.
3- Commercial insurance practices are not in the public interest.

See http://www.slate.com/id/2190273/ We will likely see much more on this topic.

Insurance for college graduates

New data gathered by insurers shows that parents continue to be the driving force in a college graduate’s decision to buy short term medical insurance following graduation. Parents pay the premium in more than half of the short term medical insurance policies issues to those in the 21-24 age group. Without this parental financial support, a college graduate is four times more likely to go without medical insurance for a period of two months or more following gradation.

College graduates and their families are often surprised to learn how affordable health plans can be. MedSave.com, a leading provider of low cost medical insurance for college graduates, reports that the average cost of the six most popular health plans to young adults has dropped this year to for the first time in recent history. The price drop is due to the expansion of limited benefit plans rather than a reduction in overall health care costs.

But more health plan choices also means that there is more potential for selecting the wrong coverage. Not surprisingly, the least expensive health plans tend to be the most popular among young adults. This can lead to less than adequate protection. These health plans tend to provide up-front benefits for smaller medical expenses like doctors office visits but offer the least protection for catastrophic risks. It is important that college graduates choose the right plan for their own health situation. It appears that parents may be less likely to be involved in the selection of the insurance than in helping with the cost. Many college graduates are purchasing insurance for the first time and purchase trends indicate that some are making uninformed choices based solely on the cost of coverage or misperceptions of the risk/benefit aspects of insurance choices.

In most cases a high deductible short term medical insurance policy provides a young adult with the best protection at the lowest cost. Most college graduates and other young adults do not benefit financially by purchasing health insurance that covers routine health care like doctors office visits, lab tests and prescription drug costs.