Recessions deal laid-off employees a double whammy. Many not only lose their jobs but their coveted health care benefits as well. They are left with much more expensive options for paying for a visit to a doctor or dentist. And that just puts more pressure on them to find employment in a job market that is rapidly deteriorating, as in the current recession.
About 4.2 million Americans will lose their health insurance by 2010, three years after the current recession began, predicts the Center for Economic and Policy Research, a Washington, D.C., think tank. Under that scenario, the percentage of Americans with benefits will drop to 82.8 percent of the population from the current 84.2 percent, the group said.
Americans receive benefits primarily through employer-sponsored plans, Medicaid and Medicare, the center said. State Insurance Department officials worry that increasing numbers of financially strapped consumers will let their coverage lapse.
"We're concerned in this environment, with market conditions and the rise in unemployment, that people may be tempted to forgo obtaining insurance where they are required to, or to refrain from purchasing optional insurance where it might be in their best interest to do so," said Steven Nachman, an Insurance Department deputy superintendent.
The message from insurance experts is this: Cut down, but not out. Here are some cost-saving options:
HEALTH INSURANCE
COBRA. Laid-off workers often opt to continue their health insurance under this federal law because it gives them continued access to their ex-employer's group rates for up to 18 months generally. But the coverage is expensive.
Laid-off workers pay the entire premium, plus up to 2 percent in administrative costs. So, if an employee's monthly cost for a family plan was $400 because of a 50-percent employer subsidy, under COBRA that amount would more than double.Some unemployed workers will catch a big break if they qualify for the COBRA subsidy that is part of the stimulus package signed into law Feb. 17.
The program will subsidize 65 percent of COBRA payments for up to nine months for eligible unemployed workers. After their former companies notify them, workers who had declined COBRA have 60 days to sign up for the subsidy.
Among the qualifications: losing jobs between Sept. 1, 2008, and Dec. 31, 2009; and adjusted gross income of $145,000 and $290,000 for joint filers.Generally, though, it pays to shop around before committing to a COBRA policy.
"The purpose of COBRA is not to get you cheaper insurance," but to prevent a gap in medical coverage, said Steven Weisbart, chief economist for the Insurance Information Institute, a Manhattan-based trade group. Healthy New York. This state program provides more affordable health insurance policies to uninsured working individuals or those without comprehensive medical coverage, among others.
The savings can be considerable for this income-based program. For example, an individual paying $870 monthly for an HMO premium could pay as little as $320 a month through the program.Health savings accounts. This is the high-deductible, lower-premium alternative to health insurance. HSAs allow you to pay for out-of-pocket health care expenses with tax-free dollars.
But the IRS requires you to enroll in a "catastrophic" health insurance plan to qualify for an account. Though noted for lower premiums, the plans have high deductibles that could run several thousands dollars a year.
"The HSA is the wave of the future to a degree," said Susan Sajiun-Fitzharris, a vice president at United Benefit Consulting, a Smithtown division of the insurer Hubb International.But the plan doesn't suit everyone.
It's ideal for individuals under age 35 who have no pre-existing conditions and expect few out-of-pocket expenses, she said.
LIFE INSURANCE
Keep current. If you bought individual life insurance five or more years ago, you could probably find a better deal today. "Life insurance rates, especially for term insurance, have dropped because people are living longer," said Weisbart of the Insurance Information Institute.
A term-life insurance policy is in effect for a specified period, unlike whole life insurance, which covers the insured until death.Consider term-life insurance with a convertibility feature to whole life, Weisbart said. The terms, which are renewable, can be as little as one year and as much as five years. Overall the premiums are cheaper than for whole life outright.
Consider using an agent. "Get good advice from someone who really understands [the industry] and can tell you what your needs are," said Jerry Davies, a spokesman for the Los Angeles-based insurance company Farmers Group Inc.
AUTO INSURANCE
New York drivers must have car insurance or face fines, or worst, a revocation of their license. "This is not an area to skimp on," Nachman of the insurance department said.
Use the Web to shop around for a better rate. "It's a competitive marketplace," Nachman said. Increase your deductible to reduce your premium. The higher the deductible, the lower the premium.
Typical deductibles for collision or comprehensive coverage are $250, $500 and $1,000, according to the National Association of Insurance Commissioners.
Know what the higher deductible entails, said Jim Haas, an auto-product researcher and development manager at Progressive, an insurer based in suburban Cleveland. If you raise your deductible from $500 to $1,000, he said you could save 15 percent to 30 percent on a collision premium. "The downside is that if you do have an accident [and you are at fault], there is more money out of pocket that you have to pay," he said.
Update and reap the discounts. You could qualify for discounts for safety features such as anti-lock brakes or for paying your premiums in full or online, Haas said.
Buy all your insurance, such as car and homeowner, from the same company. "There are discounts given for people who bundle," said Davies of the Farmers Group.
LONG-TERM DISABILITY INSURANCE
Most larger companies pay some portion of this benefit for employees, Weisbart said. So laid-off employees are on their own to obtain this insurance.
Elect a higher waiting period for benefits to kick in, also known an "elimination period." The longer the waiting period, the lower the premium, Weisbart said. "So if you are going to buy disability insurance, you should assure against bigger risks," Weisbart said. "In order to make that affordable, you may have to take a longer waiting period."Shop around. "The disability insurance market ... is competitive," he said. "Companies do offer different prices for the same benefit."
Online resources
Before you decide to change or cancel an insurance policy, you should:
Comparison shop. Rates can vary significantly among insurers.
Ask about discounts. Taking defensive-driving can get you a car-insurance discount.
Read your policy carefully before signing.
Regularly review your policies and update accordingly.
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