Individual or Cobra Insurance? How do you Choose?
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Individual or Cobra Insurance? How do you Choose? 

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By Steven J. Cindrich

February 2010 - Based on the current economic climate, companies are downsizing and many Americans are losing their jobs and with that losing their health insurance coverage. Most Americans get their health insurance from their employer. So for many it’s the first time that they have had to decide between purchasing the government-subsidized COBRA option and selecting an individual health plan.

To make an informed choice, first you have to understand the difference between the two options. COBRA stands for Consolidated Omnibus Budget Reconciliation Act and it allows workers and their families who lose their health coverage the right to continue group health benefits provided by their employer for 18 months at your own expense. When your employer offered health coverage, generally they paid part of the insurance premium.  For many, this cost is much more than they are used to paying and can seem astronomical.

However, because of the economy, last year the government stepped in and created the American Recovery and Reinvestment Act (ARRA) and expanded the length of time employers must offer COBRA as well as the amount subsidized. This means that an individual would be able to have existing health coverage longer and for a lower rate. Today, more than seven million  Americans are taking advantage of this subsidy. Congress is considering extending the COBRA subsidy in 2010 so that individuals are eligible for coverage up to 24 months, payable for 15 months at 65 percent of the original value of coverage. (Sour U.S. Department of Labor, www.dol.gov)

Even if you’re eligible for COBRA, you do have another alternative—individual health insurance, which can be used to bridge the gap until you land a new job with health benefits. With individual, or short-term health insurance, you . pay premiums that cover unexpected healthcare expenses. Premiums may be higher than expected, since you are paying the entire cost of the premium without any subsidy from an employer. But you may be able to select a plan with a lower benefit level than the one offered by your former employer, thus saving you costs that you would incur with COBRA. Many health insurance carriers offer individual health insurance, so choices are great, it just takes some time and effort to explore the opportunities.

Another benefit of Individual health insurance is that it is renewable.  When your COBRA coverage period runs out, it ends, and it cannot be renewed.  Individual insurance can be renewed for as long as you need it.

Exploring your options prior to making a decision is critical to getting health coverage that works for you. Don’t just assume that COBRA is your best alternative simply because it is being offered through your employer. Shop online, compare costs, speak with a broker or agent and/or get recommendations from friends and family. Health insurance and healthcare costs are a big part of most people’s budget. Making an educated choice will save you money and provide the health insurance safety net coverage you need

Steven J. Cindrich is the director of strategic business development at Optima Health, a Virginia-based health plan with more than 416,000 members, nationally-recognized for its quality, service and innovative programs.


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