Health Insurance Information for a Person who is Unemployed

Most people obtain health coverage through a health plan offered by their employer. However, state and federal law allows people who have recently become unemployed to continue their previous health coverage for some time. If these laws do not apply in your situation, several other options for coverage or low-cost health care services may be available.

The following steps can help you find health coverage if you´re unemployed:

1. If you previously belonged to an employer-sponsored health plan, and have been separated from the job for fewer than 60 days, you may be able to keep your health coverage
2. Locate other group coverage
3. Determine whether you qualify for Medicaid
4. Buy an individual policy from a private carrier
5. Apply for coverage through the Texas Health Insurance Pool
6. Find low-cost health services in your area

1. If you previously belonged to an employer-sponsored health plan, and have been separated from the job for fewer than 60 days, you may be able to keep your health coverage.

If you lose your group coverage for employment-related reasons, you may be able to continue your coverage for a limited time.  Employees who stay at a job, but lose coverage eligibility because of a reduction in the number of hours they work, are also usually able to elect to continue their coverage.
The employer is no longer required to contribute any amount toward premium costs, so you must pay the full price of coverage yourself. However, continuing a work-sponsored plan may still be more affordable than purchasing coverage individually.

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that gives employees – and some retired employees – the right to continue group health coverage for a specified period.

You may extend coverage for yourself for up to 18 months and for your spouse or any dependent children for up to 36 months. COBRA coverage can end early if your employer stops offering a group health plan.

COBRA applies to all employer health benefit plans with 20 or more employees, except plans sponsored by the federal government and certain church-related organizations. COBRA generally only applies to employees who lose their coverage because of reduced work hours or for reasons other than “gross misconduct.”

An employee’s spouse qualifies for COBRA coverage when the employee becomes eligible for COBRA or Medicare, or divorces or dies. An employee’s children qualify for continued coverage under COBRA if the employee becomes eligible for COBRA or the child loses dependent child status under the rules of the health benefit plan.

An employee, spouse, or dependent child has 60 days after qualifying for COBRA coverage to decide whether to take it. If they accept, the employee, spouse, or dependent child must pay the full premium and a 2 percent administrative fee. Depending on the situation, coverage may continue for 18 to 36 months but may be slightly longer.

Your COBRA coverages will be the same as the coverages you had with your employer’s plan before you left. For instance, if your employer plan covered medical, dental, and vision, you will receive the same benefits with your COBRA policy.

COBRA does not cover life insurance. It is important to note that you must have been a member of your employer´s plan before leaving the job to continue coverage. You cannot join an employer plan after you are no longer employed.

If you elect continuation of HMO coverage through COBRA and move out of the service area, you will be covered only for emergency services. For more information, contact the EBSA.

State Continuation of Group Coverage

Texas law requires your group plan to allow you to continue coverage for an additional six months after your COBRA coverage ends. To be eligible, you must have been continuously covered under the group contract for at least three consecutive months immediately prior to termination. Your termination may be for any reason except involuntary termination of cause.

If you’re not eligible for COBRA coverage, you can continue your group coverage for nine months. The continuation period begins immediately after your termination.

If you have a disability that meets the standards of the Social Security Administration, your coverage period may be extended by an additional 11 months. This means a person with a disability may be covered for a total of 35 months under state and federal law (18 months standard COBRA period + 11 months COBRA disability extension + six months Texas extension period).

State and federal law requires employers to tell you about continuation of coverage within 30 days of your separation from the job. If you want to continue coverage, you must notify your employer in writing no later than the 60th day after coverage was terminated If you believe an employer has not properly notified you of your continuation rights, you should contact the Texas Department of Insurance (TDI).

Before the Texas continuation period ends, your group plan is also required to provide you with information about how to enroll in the Texas Health Insurance Pool.

Note: The American Recovery and Reinvestment Act of 2009 provides a 65 percent premium reduction for certain employees who are eligible for COBRA and state continuation. For qualification information, visit the U.S. Department of Labor's website at www.dol.gov/ebsa/COBRA.html.

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2. Locate other group coverage

If employer-sponsored group coverage isn´t an option, you may be able to find other group coverage. Trade unions, religious institutions, professional associations, and fraternal organizations sometimes offer health coverage as a membership benefit.

Group health plans offered by entities other than employers typically provide coverage that is narrower in scope. They typically cover fewer conditions and have higher deductibles than employer-sponsored plans. It is also less likely that a non-employer group sponsoring a plan will contribute to the cost of coverage. This means you´ll have to pay the entire premium yourself. Non-employer group plans are usually more expensive than employer-sponsored plans, although they are still often less expensive than an individual policy, particularly if you have existing health problems.

Groups must make their health plans available on equal terms to all members. However, a plan might only be offered to members who have belonged for a certain period of time or have achieved a certain rank within the group. Health risk factors may not be used to determine eligibility for plan membership. Therefore, group coverage may be a good option if you have a pre-existing health condition. Be aware, however, that you may have to wait a certain period of time before pre-existing conditions are covered.

Group members who do not join a plan within 30 days of the time they first become eligible will typically have to wait until the plan´s annual 30-day open enrollment period in order to join.

Before joining a non-employer group plan, you should ask other participating members in the group about their experience with the coverage. Most plans are reputable, although fraud schemes have been known to operate under the pretense of offering coverage through a non-employer group. Such an operation will likely collect your premium but disappear if you have a claim. It is illegal in Texas to form a group for the sole purpose of providing health coverage. Also, a group cannot legally require you to join a health plan as a condition of membership.

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3. Determine whether you qualify for Medicaid

The Health and Human Services Commission (HHSC) determines Medicaid eligibility in Texas. People who receive Temporary Assistance for Needy Families (TANF), also commonly known as welfare, automatically qualify for Medicaid. Other people also may qualify based on their income and resources, including:

• Families that have high medical bills they can´t pay
• Families and individuals that leave TANF for work or whose time limits have expired
• Low-income children under age 19 and pregnant women
• Youths aging out of foster care

Different eligibility requirements apply to each group. In order to find out if you qualify, you need contact your local HHSC Eligibility Office.

• Call 2-1-1, the national abbreviated dialing code for access to health and human services information, to reach a Health and Human Services representative who can determine whether you qualify for Medicaid.
• Go online to the State of Texas Assistance Referral System (STARS) for an interactive map to help you locate a Medicaid assistance office in your area.

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4. Buy an individual policy from a private carrier

If you´re unable to obtain a group policy and exceed the income requirements for Medicaid, you may be able to buy individual coverage directly from a Texas-licensed health carrier. View a list of carriers offering individual plans on TDI´s website.

Individual policies can be expensive, and carriers will evaluate an applicant´s health risk factors before making a decision to issue coverage. That means that if you have a serious medical condition, or are predisposed toward a certain condition, a carrier may decline to issue coverage. However, if a carrier declines to cover you, keep shopping. Each carrier has different criteria for accepting customers.

Individual coverage may be purchased as either an indemnity or managed care plan. Indemnity plans are sold exclusively by insurance companies, and will generally cover services from any licensed health provider as long as treatment is consistent with the terms of the policy. Managed care plans can be sold by both insurance companies and HMOs.

Typically, managed care plans are more affordable than indemnity plans, but indemnity plans provide members with the most flexibility in obtaining health services. The trade off is essentially choice versus cost.

Both carriers and agents must hold a valid Texas insurance license to legally sell insurance in the state. Before purchasing any individual health plan, it is important to verify that the carrier and agent are licensed. Verifying that the carrier is licensed protects you against fraud. In addition, a state guaranty association will pay some or all of the claims of a licensed carrier should it become insolvent. If you buy from an unlicensed entity, you may have to pay the costs of any claims yourself. For many health care services, this cost could be significant.

To verify an agent and company´s licensing status, use the Agent Look-Up feature or view the company profiles on our website.

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5. Apply for coverage through the Texas Health Insurance Pool

If you are unable to obtain coverage through any other source, you can apply to join the Texas Health Insurance Pool (Health Pool). The Health Pool is a program primarily intended for Texans who are unable to obtain insurance from licensed private insurers because of their health condition.

Health Pool coverage is similar to that included in employer-sponsored or private insurance plans. Benefits cover hospital stays, physician services, and prescription drugs. The Health Pool also provides coverage for serious mental illness, subject to calendar year maximums for inpatient and outpatient treatment. The Health Pool does not cover treatment for chemical dependency or drug abuse.

Coverage through the Health Pool can be expensive - premiums are twice the rate charged in the standard market, as required by state law.

To qualify for Health Pool coverage, you must be one of the following:

• a federally defined eligible individual (HIPAA)
• rejected for substantially similar individual coverage for health reasons
• unable to find substantially similar individual coverage, except with riders that exclude coverage for medical conditions.
• a dependent of an adult covered by the Health Pool
• certified by an agent as unable because of a medical condition to obtain substantially similar individual coverage from a licensed insurance company or HMO that the agent represents
• diagnosed with a medical condition that automatically qualifies a person for coverage from the Health Pool.

If you are still eligible to continue an employer-sponsored health plan after separation from a job under the terms of federal COBRA regulations, you may be eligible for the Health Pool, but with a pre-existing condition waiting period.

The Health Pool website provides more information.

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6. Find low-cost health services in your area

If you are unable to obtain any health coverage, certain federal, state, and county health services programs may be able to help.

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For more information contact: