Your Money: Health insurance after job change

Your Money: Health insurance after job change

July 31, 2008

Individuals who find themselves a victim of a layoff or find a new job that doesn't offer health insurance face a difficult task in deciding how to replace health insurance. The options might be more expensive than a subsidized corporate plan, but some do offer tax benefits that an employer can't.

The first option is to continue your previous employer's insurance through COBRA. This maintains your coverage, but it's expensive. You now must pay the full premium, and employers usually tack on 2 percent more to cover administrative fees.

Instead of this option, explore an individual policy with the same insurer or another provider that includes your doctors in its network. If you are healthy, you could also lower the benefits provided to get a lower rate.

Another option is to use a Health Savings Account. These let you make tax-deductible contributions to a savings account in which withdrawals are tax-free if used to pay medical costs. Any other withdrawal purpose is subject to a 10 percent penalty. The balance, when you turn 65, can be withdrawn for any reason without tax penalties. You must pair the HSA with a high-deductible medical policy and not be eligible for coverage from your or your spouse's employer.

To help you sort through the myriad of choices, start by asking an independent insurance broker to shop the marketplace for policies that fit your situation.

An independent broker isn't limited by one insurance company and can compare policies for you.

Because they are compensated by the insurance company you that select, make sure you are given at least three options and even submit your request to at least two brokers.

Also, try searching online at eHealthInsurance.com and consulting a financial adviser, who might have further resources available and help you make your decision.

MCT

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