COBRA PREMIUM BAILOUT
May 16, 2009 -- When you're laid off, the loss of health insurance can be almost as devastating as the loss of income. But what many don't know is that the federal government will pay most of the insurance tab for nine months.
Under the recently enacted economic stimulus plan, the federal government is offering reduced premiums on Cobra coverage, which allows former employees to retain their group health insurance for 18 months. Workers who are terminated between Sept. 1, 2008, and Dec. 31, 2009, will be required to pay only 35 percent of the premium to continue their insurance plan. The discount is available for nine months; after that you'll have to pay the full premium.
Chris Zweidinger, vice president of employee benefits at Crissie Insurance Group, said many recently laid-off workers are being overcharged for Cobra because they are not aware of the discount.
"It's not being communicated. I'm seeing tons of people who are overpaying," Zweidinger said. "It's tough to be unemployed, but it's even tougher when you're paying a rate that should be reduced by 65 percent."
Zweidinger said that if you are being overcharged, you should contact your employer about getting the rate reduced.
If you're unemployed longer than 18 months or start your own business, that's the time to shop for individual health insurance plans, experts said.
An insurance broker can help you determine which plan best suits your needs.
Robert Zirkelbach, a spokesman for industry group America's Health Insurance Plans, cautions consumers not to choose a plan based on price alone.
"They should look not just at the premium but at a variety of other factors: Do they have a particular physician they go to regularly? They need to make sure they're in the network," Zirkelbach said. "Do they want the variety of choice of a PPO, or are they fine in a more managed network like an HMO?"
Zirkelbach also recommended paying close attention to the amounts of deductibles and co-payments so that you are fully aware of the costs of coverage beyond the premiums.
Don't skimp on your health coverage due to a job loss, said Dieter Freer, divisional senior vice president for local and consumer markets at Blue Cross and Blue Shield of Illinois.
"Health care is very, very expensive, and if you get exposed to a critical situation when you are not covered, it could be financially ruinous," said Freer.
"If you owned a house, you wouldn't let your fire insurance go. The chances of your house burning are not as great as something going wrong with your health."
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