Your Health Insurance - COBRA and COBRA Alternatives

The first thing to know is that COBRA is not insurance. It is a law that allows you to continue your company-paid health insurance at your own cost if you lose your job. You are usually eligible for COBRA if you worked for a company that has more than twenty employees and provides group health insurance to its employees.

The cost of COBRA is often very high. Here's why. You are taking over the insurance you have had all along through your employer at the same cost your employer paid. Group insurance, particularly plans with little or no employee out-of-pocket costs, is usually very expensive.

If you lose your job and are COBRA eligible, you will usually get written notification in 14 to 45 days after becoming eligible. After you have been notified, you have up to 60 days to elect to take coverage. If you elect to take COBRA, you have up to 45 days to make the first premium payment. So, the process can stretch out for quite a while.

If you elect COBRA, the coverage, and the premiums that pay for it, start from the day you lost your company-paid coverage. If you use a lot of your election period and payment grace period to hold off the premiums for a few months, you could end up with a huge bill.

Additionally, if you had family coverage on your employer's health plan you can elect or decline COBRA for each family member individually. That feature can be very useful in managing your options, especially if someone in your family has pre-existing medical conditions.
There are a lot more important details to COBRA, but this covers the basics.

If you realistically expect to have company-paid benefits again within a year, you may want to consider short-term health insurance. It's usually much less expensive than COBRA and the other major medical options, and qualifying medically is generally easier.

Like the name implies, you buy short-term health insurance to cover a short period of time, usually 1-12 months. If your need is anything beyond 12 months, regular major medical health insurance is more practical.

There are some downsides to short-term medical plans. Many do not cover prescriptions, and most exclude pre-existing medical conditions. More importantly, if you develop a serious medical condition while on short-term, you will not be able to renew the short term plan, and will likely have difficulty qualifying for more permanent health insurance.

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If you do not expect to be back on a company-paid health plan within a year, you should take a look at individual major medical health insurance. This is, by far, the most powerful, most common alternative to COBRA available. It is usually much less expensive than COBRA, and the coverage can often be structured to be as good or better than the health insurance you had with your employer.

There are some downsides to individual health insurance. You have to qualify medically for most plans. If you have serious pre-existing medical conditions you can pay more for the coverage or you could even be declined coverage.

There are a few other options available that cost even less. They provide some financial help, but no catastrophic protection.

Short-term and individual major medical health insurance can be very good, cost effective alternatives to COBRA. However, you should consult with a professional insurance agent to ensure you are making the best decision for you and your family.
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