Health Insurance Coverage Options for the Unemployed

In the United States, the most common ways of getting health insurance are either through the government’s socialized Medicare program for seniors, or through one’s employer as a job perk.  But how, then, is one to obtain health insurance if one is unemployed and short of retirement age?  There are several possibilities:


The Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) allows certain former employees and retirees, and their spouses and dependents, to retain the health insurance they had through their employer for up to 18 months after leaving their job.

This is obviously a temporary solution.  Plus it only applies to some people.  (Your former employer has at least 20 employees, you were eligible for health benefits before your job ended, you weren’t terminated for misconduct, and you apply within 60 days of your job ending.)  But it can be a godsend for those who are only out of work temporarily, or for those who need some time to set up their non-employer-based health insurance.

One drawback is a COBRA plan can be quite expensive.  Typically an employer pays some or all of the cost of your health insurance for as long as you’re employed, as one of the perks of the job.  This subsidy does not continue with the COBRA plan however.  Once you’re unemployed, you’re on your own to pay for the continuing coverage.

Sometimes the government steps in to soften this, during times of high unemployment when many people are at the breaking point financially.  One of the provisions of the economic stimulus plan in February 2009, for instance, was to pay 65% of the COBRA costs for the first 15 months after workers lost their jobs.

2.  Medicaid

Medicaid is the government’s health plan for poor people.  Eligibility is based on certain requirements concerning age, disability or medical condition (e.g., pregnancy), citizenship status, and income and resources.  If your unemployment has put you below a certain level of poverty, you may be eligible for Medicaid.  You would need to inquire in your particular state, for the details of the plan vary from state to state.

3.  Parents’ plan

Under the recently passed health care reform legislation, adult children may stay on the employer-based health plan of one of their parents until age 26, even if they are not students or dependents.  So this may be an option for an unemployed person within this age range.

Note, though, that insurers aren’t required to institute this provision until their new plan year starts, which for most is January 1, but could be earlier or later.

4.  Self-employed

If while you are out of work you can come up with something to do to generate at least some income – perhaps a home-based business selling items on eBay, for instance – and you have at least one employee besides yourself (even just a spouse or family member), there may be advantages to structuring this as a formal business.  Businesses of at least two people (at least one person in a few states) are eligible for group health insurance coverage, one consequence of which is you cannot be turned down for a pre-existing condition.  (The recently enacted health care reform bars insurers across the board from denying coverage based on pre-existing conditions, but that provision doesn’t kick in until 2014.)

5.  Private coverage

Finally, there is always the option of simply buying insurance privately, on the market.  There are websites specializing in facilitating health insurance shopping, or insurance agents you can talk to who will try to put you in the best plan for you.

Like with non-subsidized COBRA coverage, this can be quite expensive.  Or to avoid sticker shock you may have to go with much more limited coverage.  It’s generally not going to be a very appealing option, yet it still may be better than foregoing health insurance entirely.

In at least one of these ways, you should be able to obtain health insurance even if you are unemployed.  Which option is best, if any, will depend on your specific circumstances and financial status.


“Health Insurance for the Unemployed”

“Health Insurance for Unemployed Workers”

“Health Insurance Options for Unemployed Beyond COBRA”