If you are reading this, there is a chance that you are unemployed and looking for work. Sorry to hear that, I have been there and it sucks. Keep your head up, make good financial choices and find the next (better) thing.
Health Insurance is confusing enough, but being unemployed adds a layer of complexity to it. Moreover, there are some complications and rules for using your Health Savings Account while unemployed. The following is a guideline for HSA holders if they ever find themselves unemployed and needing to lower their costs and make smart financial decisions:
Losing a job definitely means a loss of cash flow and it is wise to seriously curb your spending during this period. That said, health insurance is not something you should cut from your budget. It is never worth opening yourself up to the risk of huge medical bills of a hospital visit just because you lost your job. I often state it as such:
A job loss is a temporary setback, but being injured while uninsured can create a long term crisis.
You should, however, consider cutting back on the type of insurance you have. At this point, you just need barebones, good, solid coverage, not a “cadillac” plan that includes low deductibles, low copays, vision, massage and back rubs, etc. You should be looking at the following and finding one that is affordable:
- Short Term Insurance
Short term health insurance is temporary insurance designed to fill gaps in coverage. Typically, this insurance lasts for 6 months but may last up to a year. Premiums are much less expensive than comparable plans and are a great option while you look for a job. You can find your term plans at eHealthInsurance.
- High Deductible / Catastrophic Health Plan
If you can’t find a short term insurance plan, search for plans that are longer in duration. What you are looking for is low premiums / high deductible – typical of a HDHP. Your goal is to use this insurance as little as possible (using it can be expensive) and to have it in case something catastrophic happens. You can also get quotes for this at eHealthInsurance.
- Continue your current health plan using COBRA
Your previous employer might be required to offer you your current health insurance after you leave as a result of the COBRA health care law. Depending on your plan, you might find COBRA very expensive as you are paying the entire premium now. However, definitely compare it against your other options.
Use HSA funds to pay for health insurance premiums while unemployed
If you had the foresight to contribute to your health savings account prior to losing your job, you will be glad you did. One of the HSA’s best benefits is that it allows you to use your HSA to pay for health insurance premiums while you are unemployed. To qualify, you must be receiving federal/state unemployment insurance or paying for COBRA or other continuation coverage. If so, your health insurance premiums while unemployed are qualified medical expenses.
In essence, you could contribute to you HSA for six months, lose your job, and use those contributions to pay for your health insurance for the next six months, all tax free. It is great piece of mind to know that, should you lose your job, your health insurance is financially covered. It is a part of using an HSA as an unemployment safety net.
Cash out any unreimbursed QME you are due
If you have been an astute HSA holder, you have been protecting your HSA and paying for as many medical expenses out of pocket as you can. Doing so allows two things to happen:
- You don’t deplete your HSA, so it continues to grow, tax free
- You are allowed to reimburse yourself for those expenses at any time in the future from your HSA
This is all part of the using your HSA as an ATM strategy. Now that you are unemployed, it may be time to cash those expenses in and generate some cash flow. While it isn’t ideal to tap your HSA, sometimes the situation calls for it and this is a great source of cash should you need it.
Negotiate any Health Insurance Expenses
While you are unemployed, cash is definitely king and you want to save as much as you can. You have been smart and gotten a high deductible health plan for the short term, but sometimes things happen and you need medical care. If your unexpected expense is below your deductible, you will likely be paying this out of pocket (or HSA) which can sting (these plans only kick in once you hit that deductible).
Don’t be afraid to negotiate your health care costs should they arise. Be straight up with your hospital billing agent and tell them you have a high deductible health plan that this entire expense will be paid out of pocket. Given that they only receive a fraction of what they bill insurance companies, that is amount you are shooting for.
Here is a great link on how to negotiate lower health care prices while you are unemployed. I have personally negotiated and lowered physician/emergency room medical expenses as well as with insurance companies while I was unemployed. Don’t be afraid, you can do it.