Laid off, what about health insurance

Laid off? What about health insurance. Typically, you have three options – COBRA, purchasing on own, and going without. Going without is a really bad idea, and if it can be avoided then do so. COBRA is another option, and with the American Recovery and Reinvestment Act (ARRA) of 2009 the government may pay for 65% of your premiums. The final option is purchasing directly.

How you choose between the three options depends upon age, health, family size, available assets, eligibility under ARRA, and state you live in. The younger you are the more tempting it may be to go without coverage. The problem is that health issues are often a “surprise”. More importantly, if you experience a health issue when you are not covered it will most likely be difficult to get coverage later.

For example, a person in their 20’s opts not to get insurance. (Health insurance for a 20 something is comparatively cheap, so I can’t imagine why anyone would do this.) While they are not covered this person finds out that they have diabetes. It will be difficult to then go out and look for health insurance because you now have a pre-existing condition. Usually, this ends up being an issue always. If you were covered before the diagnosis, then it would not inhibit you from changing plans. However, once diagnosed it is advisable to never be without coverage.

COBRA is mandated by federal law. Basically, it allows the employee to purchase similar (or the same) coverage they had during employment. Often it is very expensive. However, under the ARRA you may qualify to have 65% of the premiums paid. Therefore, you would only be responsible for 35% out of pocket. As an example I will use a COBRA premium of $1,000. If you are a family that is pretty close to what your cost could be. You would only have to pay $350 per month for continuation of coverage. That is a pretty good deal, and worth every penny.

Government subsidized COBRA does not apply to everyone. (I have included a link on the bottom for more information.) There are restrictions on who will receive assistance and it lasts for 9 months. So if you are unemployed longer than 9 months you may have to consider other options. Usually, it is the choice of purchasing on own or continuing COBRA. (COBRA is usually available for 18 months, government subsidy only for 9 of those.)

As I have said, COBRA may be $1,000 per month for a family. It could also be higher. Typically these plans have low, if any, deductibles. So it may be worth looking at purchasing insurance individually. You could purchase a higher deductible policy and deposit the difference until you have the deductible set aside. (I give a $ example on my blog.)

Here are some bullet points to consider when choosing between COBRA and individual purchase:

Are you eligible under ARRA
Is the 65% co-pay taxable in your state
Not taxable for Federal Income
Varies by state – Oregon likely to be taxable; Washington & California not taxable
What is the cost of purchasing directly?
This may be tax deductible
Given the money that you have, what is going to work best for you?

Kennedy health plan includes long-term care

WASHINGTON (AP) — Americans would be able to buy long-term care insurance from the government for $65 a month under a provision tucked into sweeping health care legislation that senators will begin considering next week.

The 651-page bill, released Tuesday by Sen. Edward M. Kennedy, D-Mass., would revamp the way health insurance works. Insurance companies would face a slew of new government rules, dealing with everything from guaranteed coverage for people with health problems to possible limitations on profits. Taxpayers, employers and individuals would share in the cost of expanding coverage to nearly 50 million uninsured Americans.

Release of the bill by Health, Education, Labor and Pensions Committee Democrats came as lawmakers at both ends of the Capitol accelerated their drive to enact health care legislation. House Democratic leaders also outlined a proposal, but offered only limited details.

Both plans omitted specifics on how to cover the costs, which could exceed $1 trillion over 10 years. Given the uncertainty as well as the political sensitivity over raising taxes or cutting Medicare, Senate Republicans prodded Democrats to fill in the blanks before the scheduled beginning of committee work next week.

A first-ever tax on employer-provided health benefits figures prominently among financing options under consideration in Congress, but President Barack Obama campaigned against that last year and its inclusion would require him to reverse course. Obama has proposed $634 billion in tax increases and spending cuts as a down payment on the plan and is soon expected to outline an additional $300 billion in Medicare and Medicaid cuts.

Kennedy's long-term care plan is designed to help disabled people pay for support services that would allow them to remain in their own homes and avoid moving into nursing homes. People would enroll in the program during their working years and begin paying premiums. To collect benefits, a person would have had to pay premiums for at least five years.

The benefit would be modest — not less than $50 a day — but it could be used to cover a wide range of services.

Prospects for the long-term care provision are uncertain, but Kennedy's advocacy may sway other lawmakers. For Kennedy, who is being treated for brain cancer, health care legislation would be the crowning achievement of a long and productive career.

At their core, the partial draft bill released by Senate Democrats and an outline circulated by senior House Democrats were largely identical.

Individuals would be able to purchase insurance through a new federally regulated national exchange, and private companies would be barred from denying coverage or charging higher premiums because of pre-existing conditions. Those who are satisfied with their current coverage could keep it.

Both bills would require individuals to purchase insurance if they could afford it. Waivers would be available in hardship cases. The Senate measure provides for an unspecified penalty for anyone refusing to obey the so-called mandate, and House Democrats are considering a similar approach.

In both the House and Senate, Democrats want to provide subsidies to families with incomes well into the middle class. One option under the Senate plan would phase out subsidies at about $110,000 for a family of four.

House Democrats also are said to be considering a wide-ranging change for Medicaid that would provide a uniform benefit across all 50 states and increase payments to providers. Medicaid is a joint state-federal program of health coverage for the poor.

The Senate plan would allow children to stay on the parents' insurance until age 26.

On a particularly contentious point, the emerging House plan would give people the option of buying insurance provided by the federal government.

Democrats on the Senate committee embraced a similar provision last week but omitted it from Tuesday's draft in what Sen. Chris Dodd, D-Conn., said was a gesture to Republicans who oppose it.

Sen. Mike Enzi, R-Wyo., the top Republican on the committee, responded derisively. He said Democrats did so "because they know we're not going to like what they've written and they don't want us to have any time to comment."

Senate Republicans on two committees most involved with health care urged Democrats not to move ahead without detailed cost information. "Paying for health reform in a responsible and sustainable way may be the most single difficult element of our efforts," they wrote.

But after months of preliminary effort, Democrats made clear they intend to move ahead on their own timetable, one that calls for passage of legislation in the House and Senate by early August. A final compromise would wait for September or later in the fall, according to a schedule the party's leadership established weeks ago.

"This is the year we have to do it," said Rep. Henry Waxman, the California Democrat who chairs the House Energy and Commerce Committee. Waxman was one of several senior Democrats who outlined proposed legislation to the party's rank and file during the day.

Numerous senior Democrats now aging and ailing have worked their entire careers on health care, but no one is more identified with the issue than Kennedy, first elected to the Senate in 1964. In a poignant announcement Tuesday, Dodd said Kennedy, diagnosed a year ago with a brain tumor, will be unable to attend the working sessions of the health committee he chairs beginning next week.