Should You Choose COBRA Coverage?

Should You Choose COBRA Coverage?

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Lately, laid off workers have been hit with a double whammy in the form of reduced severance packages and responsibility for paying for their own health insurance coverage.  Many companies who had previously compensated their laid off employees have cut back their severance plans while few offer any health care coverage beyond the end of employment.

womanFederal law, however, allows laid off workers to “hang on” to their employer health care plan for as long as eighteen months after being terminated. Known as COBRA — Consolidated Omnibus Budget Reconciliation Act — the law requires companies with 20 or more employees to continue to offer health insurance at group rates (plus a 2% administrative fee).

Bu,t as you might imagine, paying for your own health care can be expensive, made all the more prohibitive when even unemployment insurance isn’t enough to live on. Although COBRA coverage is for qualified former employees, their spouses and eligible dependent children, even former spouses, COBRA doesn’t help out if your company goes out of business or decides to drop health insurance for its remaining employees.

Government Subsidy Makes COBRA Affordable

Not many former employees consider COBRA to be affordable especially if they are looking to cover their spouse and other dependents through this set up. The premium can easily top $1000 in one month as former employees are responsible for both the employer and employee portions of the premium.

However, as a prelude to President Obama’s historic overhaul of the nation’s health care industry, Congress passed legislation late this past winter which provides a 65% subsidy for up to nine months for people who lost or will lose their jobs between September 1st of last year and December 31st of this year. That means the family who expected to pay $1000 a month will now have to pay only $350 a month.

COBRA is the ideal choice for anyone who is having difficult obtaining health insurance on their own especially if they are rejected for a pre-existing condition. With COBRA you cannot be turned down for reasons having to do with your health unlike with private insurance.

Of course, laid off workers may still want to examine what their options are under private insurance especially if they are young and in good health. Not every state has a highly competitive health care market, but if yours does you may come up with a plan better than COBRA, one that offers more complete coverage and/or a lower insurance premium.

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