An updated version of this article was published on Aug. 20.
America’s unusual health care system that links coverage to jobs means that during bad economic times, people who find themselves jobless are also suddenly without protection from medical costs.
This is especially worrisome for the millions of people who have already lost jobs because a public health crisis has virtually shut down the U.S. economy. According to one estimate, the economic downturn that the novel coronavirus outbreak is triggering could leave as many as 40 million people uninsured.
While the American social safety net has large holes and the health care system is fragmented and confusing, the newly unemployed have several ways to replace employer health benefits.
But there are barriers to getting new coverage, including wide variances in what’s available from state to state, red tape and cost. Those burdens will weigh even heavier on people who are also trying to sign up for unemployment insurance, housing aid and food benefits, as they adjust to a new reality.
“It’s easy to lose coverage,” said Karen Pollitz, a senior fellow at the Henry J. Kaiser Family Foundation. “Not so to put it back.”
“There is not yet a path for everybody who was uninsured or becomes uninsured to get new coverage,” she continued. “And for some people, there’s a path, but it’s really windy and if you get lost on the way, you’re going to wind up not getting coverage.”
But that doesn’t mean it’s impossible, and the health and financial risks of being uninsured make it wise to explore different ways to find coverage.
Americans who lost jobs and job-based health benefits from a company with at least 20 employees can opt to remain in their current health insurance, typically for 18 months but sometimes longer. COBRA ― named after the law that created it, the Consolidated Omnibus Budget Reconciliation Act of 1985 ― gives former employees that right.
But there’s a big catch: These unemployed workers must pay the full premium (plus a 2% administrative fee).
Last year, the average cost of job-based health benefits for a single person was almost $600 a month and more than $1,700 for family coverage, according to a Kaiser Family Foundation survey. Employers cover an average of almost 80% of that premium for single workers and 70% of it for family coverage. But once you’re on COBRA, that gets significantly more expensive.
“The vast majority of people will not take COBRA due to the cost,” Pollitz said.
Keeping the same policy and paying the full premium may make sense for unemployed people who can afford it, she said. For example, a pregnant woman may not want to switch policies and doctors prior to giving birth, or a person in the middle of medical treatments may prefer to have continuity of care.
“This can be a lifeline,” Pollitz said.
To qualify for COBRA, unemployed people have 60 days to opt in, and there is no break in coverage. COBRA participants have 45 days to make their first payment covering the period from the end of employment to that date.
Medicaid And The Children’s Health Insurance Program
These two programs are jointly operated and financed by the federal government and the states, and there are different benefits and income limits among the states. But Medicaid generally is for people with very low incomes ― which would include jobless people who abruptly find themselves with no income at all except for unemployment insurance.
Medicaid eligibility is based on an applicant’s income the month she applies, but the extra $600 a week in unemployment benefits that Congress approved last month won’t count toward eligibility, and neither will the $1,200 tax credit most Americans should receive this year as part of that stimulus law.
Anyone with minor children living at home should check first to see if their kids qualify for Medicaid or CHIP, as the Children’s Health Insurance Program is known. (Many states adopted different names for these programs. Medicaid is called TennCare in Tennessee, for example, and Vermont’s CHIP is called Dr. Dynasaur.)
“If you have kids, Medicaid is definitely worth looking at in every state,” Pollitz said. “This is free, comprehensive coverage.” Parents can check their children’s eligibility and apply for coverage by visiting InsureKidsNow.gov. Adults can check their own eligibility via Benefits.gov.
In 30 states, children in households with incomes up to three times the federal poverty level ― which is about $65,000 a year for a family of three ― can access either CHIP or Medicaid. In 19 states, the upper limit is more than three times poverty, and two states allow only children in families with incomes up to double poverty to enroll.
In most cases, Medicaid and CHIP programs don’t charge premiums for children or adults (though some states do), and these programs typically require only small cost-sharing like copayments.
The situation is more complicated for adults, especially those who do not have disabilities or minor children living at home.
Under the Affordable Care Act, 36 states expanded their Medicaid programs to allow any adults who earn up to 133% of poverty, or about $17,000 a year for a single person, to get benefits. Nebraska will be the 37th state to expand Medicaid when its broadened eligibility rules take effect in October. Wisconsin didn’t fully expand Medicaid but offers coverage to people earning up to the poverty limit, which is about $12,800 a year for a single person.
In expansion states, Medicaid could serve as a valuable stopgap for people who lose jobs and health benefits. “If you’ve just had a big change in income, like you lost your job and your income went down to nothing, and you live in an expansion state, which is most of the states, there’s a good chance you’re going to qualify for Medicaid,” Pollitz said.
Parents may be eligible, but in non-expansion states, eligibility is strictly limited and ranges from just 7% of poverty in Texas, or $1,520 a year for a family of three, to 95% of poverty in Tennessee, or $20,600.
Medicaid benefits also can be retroactive up to three months. That means the program can cover medical costs incurred by a person who was eligible but not enrolled ― which is helpful if it takes a newly unemployed person a while to figure all this out.
In Minnesota and New York, people with incomes too high for Medicaid have another option: the Affordable Care Act’s Basic Health Program. Minnesota’s MinnesotaCare and New York’s Essential Plan are open to people who earn up to twice the poverty level, which is about $32,000 for a single person. New Yorkers may have to pay up to $20 a month for the Essential Plan, and Minnesotans may have to pay up to $80 a month for MinnesotaCare coverage.
Private Health Insurance
The annual open enrollment period for the health insurance exchange marketplaces the Affordable Care Act created aren’t until fall, but the law allows people to sign up and apply for subsidies whenever they experience a ”qualifying life event.” Losing your job-based health benefits is one of those events.
In addition, the state-run health insurance exchanges in California, Colorado, Connecticut, Maryland, Massachusetts, Minnesota, Nevada, New York, Rhode Island, Vermont, Washington state and the District of Columbia have reopened to allow any uninsured person to enroll in coverage during the coronavirus crisis.
In the 38 states whose residents use the HealthCare.gov enrollment system, however, sign-ups are only available to people who experience one of the qualifying life events. That’s because President Donald Trump refused to reopen the exchanges to everyone. The same is true in Idaho, the sole state-run exchange not to reopen.
While losing employer-based health benefits enables people to enroll on the exchanges, that’s not the case for people who didn’t have employer-based health benefits to begin with.
Native Americans in any state and Alaska Natives, however, can enroll through the exchanges at any time.
In addition, people in states that didn’t expand Medicaid who have incomes below the poverty level don’t qualify for financial help paying for private health insurance.
This so-called coverage gap exists because the Affordable Care Act was supposed to implement a Medicaid expansion nationwide, making private insurance subsidies unnecessary for this population. But a 2012 Supreme Court ruling that allowed states to refuse the expansion left the poorest adults with no affordable coverage options.
Health insurance exchange policies tend to be expensive without subsidies, as are insurance plans purchased directly from an insurance company. The average price of the “benchmark” mid-level Silver plans sold on exchanges like HealthCare.gov is $462 a month this year, and those policies can have deductibles in the thousands of dollars that must be paid before full coverage kicks in.
The Affordable Care Act provides two kinds of subsidy to address those issues.
The first are called premium tax credits, which reduce monthly premiums and are available on a sliding scale to people with incomes between the poverty level and 400% of that amount (about $51,000 a year for a single person). In addition, those who earn between poverty and 250% of poverty ― about $32,000 for an individual ― can receive ”cost-sharing reductions″ that shrink their deductibles, copayments and the like.
In Idaho and the HealthCare.gov states, people seeking to replace job-based health insurance must first apply for the right to shop for coverage. This requires documentation from a former employer or former insurer verifying that the previous coverage has ended or is ending soon. People trying to enroll in an exchange policy or an Affordable Care Act-compliant plan directly from an insurer have 60 days from the date they lose coverage to complete a new enrollment under these rules.
Exchange shoppers should be prepared for long hold times on the customer service lines and should seek help from local enrollment counselors, Pollitz advised. Trump’s large cuts to enrollment assistance likely will make it difficult to schedule help, so people should try more than one counseling organization, she said.
Eligibility for subsidies is based on projected annual income, not current monthly income like Medicaid and CHIP. Unemployed workers must account for their earnings prior to their job losses, along with their unemployment insurance payments. The $600 weekly unemployment boost also counts toward this total, but the $1,200 tax rebate doesn’t.
Exchange enrollees also must update their incomes if they rise or fall after enrollment. Customers who receive too much subsidy could be required to repay it when they file their 2020 income taxes.
Alternative Coverage Options
The Trump administration and several states have been promoting alternatives to ”Obamacare″ coverage from the exchanges that some unemployed people may want to consider, such as short-term policies that can last up to a year.
These short-term plans offer significant savings on a monthly basis compared to the comprehensive insurance sold on the exchanges. But that lower price comes with big financial risks.
Short-term plans, unlike Affordable Care Act plans and employer plans, can reject consumers because of pre-existing conditions. They can also refuse to pay claims if they determine that a policyholder received treatment for something the insurer later determines was “pre-existing.” These policies also frequently have poor coverage for essential needs like hospitalizations and can cap benefits at a specific dollar amount and refuse to cover anything beyond that.
“The theory on these other things is: Something is better than nothing. And that’s true when something is free, but these other things, they will make you pay,” Pollitz said.
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