COBRA or Short-Term Health Insurance?

Affordable health insurance isn’t always easy to find, especially if you’ve been laid off. If you were on an employer-sponsored health plan, you most likely weren’t paying nearly as much as they want you to pay for COBRA coverage. COBRA enables you to continue your insurance coverage, uninterrupted, up to 18 months. However, it can be very costly.

If you were laid off, a recent federal law mandates the employer who laid you off to pay 65 percent of your insurance coverage. You pay the other 35 percent. If coverage is $1,000 a month, you’ll pay $350, and the company will pay $650.

If you leave a company voluntarily, but your new employer requires a waiting period before issuing you insurance, COBRA gets a lot more expensive. By law, the company you left can charge you up to 102 percent of their cost to continue insuring you. The extra two percent is for administrative fees. If the company pays $1,000 a month, they can charge you $1,200 for COBRA.

Another alternative to COBRA is short-term health insurance. More and more insurance providers are offering short-term plans to individuals and families at a more affordable rate than the full cost of COBRA. It may not always cover everything your COBRA plan does, but it may be enough to get by until you find another job or get through your employer’s waiting period. You can find short-term health plans that cover an entire family for $500 or less a month. However, many of those plans limit coverage based on pre-existing conditions.

For example, if you have high blood pressure and have been treated for it within the last five years, your short-term insurance provider may not cover any treatment for blood pressure. The good news is that pre-existing conditions no longer apply to children, thanks to a law that took effect in September.

COBRA and short-term healthcare both serve an important purpose, and it’s up to every family to decide which option is better. If your family is plagued with pre-existing conditions, COBRA may be your only option. Short-term providers may consider your family too high of a health risk to insure at all. By law, COBRA has to cover anyone who was eligible for coverage under an employer-sponsored health plan.

If you decide to forgo all health insurance, there is something important to keep in mind. If you go without insurance for more than 63 days, and you have a pre-existing condition, the insurance plan at your next job can make you wait up to two years before you are eligible for coverage.

If you are denied short-term insurance because of a pre-existing condition, it may be in your best interest to find the money for COBRA. Another option is a combination package. Pay the COBRA for anyone in your family with a pre-existing condition, and get less expensive short-term coverage for children and anyone else in your family with no pre-existing condition. Just don’t let your coverage lapse more than 63 days.