A COBRA That's Good for Your Health

Unemployment is rising, and with the economy slowing, it is likely that many more will find themselves without income -- and possibly without health insurance. That's why the government enacted COBRA, or the Consolidated Omnibus Budget Reconciliation Act, in 1986.

Within that huge legal document is health insurance protection for those who lose jobs or who find themselves suddenly without health insurance because of death or divorce. Basically, it provides that the employee can continue on the company health insurance plan -- but only if he or she pays the full cost for that coverage.

As you can well imagine, adding a huge expense for health insurance just when you've become unemployed is not a pleasant thought. But if you, or a family member, have a pre-existing medical condition, it might be the only option for coverage. Weighed against losing your home to medical bills, an expensive COBRA plan may be the least of the bad alternatives.

What few people know is that for healthy individuals and families, there very well might be less expensive alternatives to COBRA policies. So here's a look at how COBRA works for extending health insurance coverage, plus an easy way to check for cheaper plans.

How COBRA works

Employers must offer to extend health insurance coverage if they employ at least 20 people and offer an employer-sponsored plan. You are eligible for coverage whether you are fired, resign or simply leave work to retire -- unless you are fired for gross misconduct.

COBRA coverage extends for 18 months in most cases. But it is extended for 29 months if the employee is disabled -- or 36 months if you are widowed and your spouse was covered under the plan or are a dependent child, or if the worker goes on Medicare and COBRA covers the spouse. As noted above, you must pay the full cost -- 102% of the cost, to be exact, to cover the extra expense of handling your account! And the coverage extends to your spouse and family if they were previously covered under the company plan.