Out of Work? Avoid COBRA's Bite

When you lose your job, the first thing you do is start cutting expenses. You can forego buying a daily latte for as long as you need to, but being without medical insurance is a risk you can't afford to take.

Several studies over the past 5 years have revealed that medical expenses account for nearly half of all personal bankruptcies in the U.S. each year. If you've lost your job -- and your employer-sponsored health care coverage -- just one serious illness or hospitalization can send you so deeply into debt you may feel you'll never be solvent again.

With unemployment rates reaching record levels, many Americans will turn to COBRA (the federal-government mandated continuation of benefits option) in order to retain their health care coverage until they find a new job.  While the new COBRA subsidy does make this coverage more attractive than before, the subsidy is only for nine months.

In today's economy, with tales abounding of people being out of work for 12 months or more, COBRA may not be the best solution for you and your family if you are laid off from your job. Here are some reasons why:

• It's expensive - With COBRA, you are forced to pay a portion of the premium costs that you used to share with your employer for nine of the 18 months that you can be covered by COBRA.  After that you will pay the entire cost of COBRA plus you pay a 2 percent administration fee.
• It's temporary - COBRA allows you to continue your benefits for up to 18 months after you're laid off. In today's economy, when job searches are lasting longer and the marketplace is more competitive than ever, 18 months may not be enough time to secure another job . In addition, with more and more companies scaling back on costs, there is no guarantee that whatever job you may find will include Health Insurance as part of your benefits package.
• It's limited - If you've been laid off by a company with fewer than 20 employees, your former employer may be able to claim an exemption - and will not be required to offer you COBRA. If your employer does offer it but you wait 60 days to enroll, any medical expenses you incurred at that time will not be covered. COBRA is also not appropriate for people who are going into business for themselves.
• You take what you get - You usually are not able to make any changes to your coverage or premium. COBRA simply continues the same plan your employer offered, and you have no power to negotiate a better premium or change the level of coverage with the insurance provider.

Purchasing an individual policy to cover you and your family may be a better alternative than COBRA. Advantages include:

• More cost effective. An individual plan to meet your needs may be far less expensive than your COBRA coverage.
• You can get coverage for as long a term -- or as short a term -- as you need. For most people, a long-term individual policy will work best, but some people might only need short term coverage. You can find both options at competitive prices if you buy health insurance on your own.
• You have more power to comparison shop the right plan -- and price -- to meet your needs. Is a short-term health insurance policy right for you? Do you need lower co-pays for doctor's visits and prescriptions? Are you generally healthy and able to save money with a high-deductible plan? You'll have more autonomy to decide these questions for yourself if you buy your own individual health insurance, rather than depending on COBRA.
• It's easy to shop online for your own health insurance. Online resources like Assurant Health's  informative Web site, make it easy to comparison shop, get information on your options and even purchase coverage immediately - entirely online.

It's important to remember that if you purchase Individual or Short Term Medical rather than maintaining COBRA coverage, you may give up your rights to coverage for pre-existing conditions or guaranteed health insurance in the future. That said, Individual and Short Term Medical are often lower-cost alternatives to COBRA.


When you’ve been laid off and are looking for work, or starting your own business, COBRA isn’t your only option. Learn more about cost-effective individual health insurance plans at www.assuranthealth.com. Copyright ©, ARAnet, Inc.