A report released today spells out in hard numbers what we all already intuitively knew: There's no way most laid-off workers can afford to hang on to their employer's health insurance on the strength of their weekly unemployment checks. The math just doesn't add up. According to the Families USA report, the average monthly premium for family health coverage under COBRA, the federal law that allows laid-off workers to continue with their former employer's health insurance, is $1,069. The average unemployment benefit, meanwhile, is $1,278 a month. That means that COBRA family coverage eats up 84 percent of a worker's unemployment check, on average. Single workers are somewhat better off: The bite for COBRA coverage is "only" 30 percent of their check. Either way, it's easy to understand why only about a quarter of those who are eligible for COBRA coverage take it.
In a handful of states, the average COBRA premium for health coverage actually exceeded the average unemployment insurance benefit, according to the report. "Conceptually, it's not so surprising," says Ron Pollack, executive director of Families USA. "But seeing the numbers compiled together, it's much starker than most thought."
Experts say it's likely that the economic stimulus package that's anticipated for early next month will contain some sort of subsidy to help people pay for COBRA coverage. If there were easy alternatives, people would already be taking advantage of them. But in the absence of great options, here are four ways you can avoid getting squeezed by COBRA.
1. Sign on with your spouse. Once your own coverage ends, you have 30 days to take advantage of special enrollment rights to sign up with your spouse's plan. Check out this Labor Department site or call 866-444-3272 toll free to find out more.
2. Sign your kids up for coverage through your local State Children's Health Insurance Program (SCHIP). Some states, like Illinois, offer coverage to all kids, regardless of family income. One couple I spoke with bought coverage for their kids through SCHIP and then purchased a high-deductible policy for themselves that gave them catastrophic coverage. Not as good as a regular plan, perhaps, but a reasonable stopgap that cost less than half of the $1,000 a month they would have owed under COBRA.
3. Delay a bit. If you think you may be eligible for new insurance within a month or two, delay signing up for COBRA. You have 60 days to decide, and if you don't have any medical expenses during that time you could save a bundle. On the other hand, if you break your leg and need care, you can sign up, pay those premiums retroactively and still be covered.
4. Get hitched. It may seem extreme, but in a recent poll, 7 percent of people said that either they or someone they lived with got married for health insurance. Saying "I do" allows you to take advantage of No. 1, above.
Related: U.S. News ranks "America's Best Health Plans."