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COBRA Isn’t Always the Best Option

As the national economy slips more into a recession, more Colorado residents are being offered COBRA when they lose their jobs. COBRA is a health insurance plan which allows an employee who leaves their job to continue to be covered under the company’s health plan given certain criteria, for a period of 18 to 36 months.

The according to a U.S. News and World Reports article, the average monthly premium for family health coverage under COBRA, is $1,069; while the average unemployment benefit is $1,278 a month. This means that COBRA family coverage can use up 84 percent of a family’s unemployment check. Meanwhile single workers fare a little better off, with COBRA averaging “only” 30 percent of their unemployment checks.

The decision to accept COBRA or look for other options has recently become more complicated by the terms of the 2009 Economic Recovery Act, which allows for some unemployed worker who are eligible for COBRA, to remain on their previous employer’s policy for up to 18 months at a rate that is subsidized 65% up for up to 9 months. This rate also may require the person who accepts COBRA to pay a 2% administration fee. According to a 2008 Kaiser Family Foundation report on Employee Benefits, even with the 65% subsidy, the average monthly cost for a family is $377 per month and $140 per month for an individual.

For people with serious pre-existing health conditions, COBRA may be worth while alternative and will typically cover them for up to 18 months. Depending on your particular health history, you may then be able to find employment and get on an employer’s plan, obtain an individual policy if a health condition changes, or enroll in Cover Colorado as a contingency. You may also be able to get health insurance coverage through a spouse’s employer based group plan.

Many Coloradans plan to obtain coverage through COBRA, their spouse’s plan or an individual policy until they find employment and are able to qualify for group coverage. State law in Colorado requires a person to work just 24 hours a week at some companies to be eligible for group health benefits.

A better option for many healthier people is to enroll in individual medical or short term medical plans. Many 30-35 year olds can obtain single person coverage for as low as $87 per month or $277 per month for family on a plan with a $3,500 deductible and a two-year rate guarantee. People aged 40-45, may want to look at higher deductible HSA qualified plans. Preferred rates average for this type of plan can be as low as $82 per month for a single person and $250 per month for a family on a plan with a $10,000 deductible, and 100% coinsurance and a two-year rate guarantee.

Since money may be tight in general, and even more so when you are looking for a job; a lower cost option that is not limited to 18 months may help in both the short and long run. In the long run, an individual policy that offers continuous coverage may be a better solution if you become self employed or find a job with a company that does not offer group coverage, and may be less expensive for a family even if group coverage is available. The point is, that it pays to shop around.

Short term medical coverage may also be a viable option for people who need coverage for 6 months or less. Short term rates for 30-35 year olds average $65 per month for a single person and $177 per month for a family of four, for coverage up to six months with a $2,500 deductible. However, this coverage is limited to no more than two renewals over a 12 month period; meaning that individual medical coverage may still be the best option for longer terms.

Losing your job is stressful and can increase family financial pressure. Compare COBRA with your other options and make a decision to obtain coverage that is best for you and your family until you find a job that provides health insurance, or longer if it make sense.

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