COBRA vs. Short Term Medical Insurance

The choices of health insurance policies for recently unemployed individuals are limited. If you need health insurance because you have just lost a job, it may be time for you to start weighing your options. Laid out in the next few paragraphs are the pros and cons of two such options that are most common to newly unemployed health insurance seekers.

The downturn of today’s economy has put hundreds of thousands of Americans out of work. If you have recently lost your job or been temporarily laid-off, then you may be looking for a way to keep yourself and your family members insured. Healthcare is an expense that many need to keep a budget for, but can’t afford to spare very much on. If you are one of the many displaced workers who needs health insurance coverage options consider the differences between COBRA options and low-cost, temporary health insurance plans.

Consolidated Omnibus Budget Reconciliation Act

• The COBRA was enacted in 1986 in order to allow workers who were between jobs, either by choice or involuntarily, to keep health insurance for themselves and their families. 


• Under certain circumstances, displaced workers who would otherwise lose their group health insurance coverage are allowed to extend coverage for up to 36 months. 


• If a worker has a spouse or dependent child on the policy, they may have the same access to health insurance during this time. 


• If termination or cutting back of hours occurs, affecting the eligibility of an employee, that employee and their family members are allowed an 18 month extension. 


• For situation where coverage would be ended because of divorce, death, or loss of dependent status, or when the covered dependent becomes eligible for Medicare, extensions can last up to 36 months. 


• The downside of the COBRA is the cost, since it is a combination of yours and your employer’s premium payment, doubling the cost of your health insurance. To remedy this, the American Recovery Reinvestment Act of 2009 was put in place, offering up to 65-percent of your COBRA payment to be covered by the government.

Short-Term Health Insurance Policies

• In order to bridge the gap between employment without paying the COBRA fees that can cost so much, you can look into short-term health insurance plans. 


• These monthly payments can often be as low as $20, but there is a downside, too. 


• You may not be eligible for this type of insurance if you are pregnant, have cancer or diabetes, or suffer some other pre-existing conditions. 


• This leaves the option of low-cost, short-term health insurance plans to healthy individuals. 


• The health insurance policy usually needs to be renewed in 30 to 60 days; because it is short term it does not automatically renew. You would have to contact your insurance agency’s customer care department to reinstate insurance for another temporary term.

With the choices between COBRA and short-term health insurance laid out for you, it should be easy to see which one will benefit your situation most. It can be a great relief to be able to find this information easily during a time of instability and transition. Knowing what is available to you and your family is always a good thing, and the goal is to keep you educated so that you can make decisions to keep your family healthy.