In these days of high-cost healthcare, most people cannot afford to be without health insurance. However, if you lose your job or your working hours are reduced, you are well aware that your coverage could be at risk. In 1986, the federal government enacted legislation known as The Consolidated Omnibus Budget Reconciliation Act, or COBRA, to allow workers who have lost their jobs and possibly their health benefits to maintain health coverage for a period of time (usually up to 18 months).

COBRA Eligibility

An individual is eligible to receive the exact same healthcare coverage that he or she had while employed, and at the same group coverage rate (usually with an additional administrative fee of 2 percent). The downside to COBRA coverage is that, even at the group rate, coverage may be too expensive for an individual. While employed, the employer was likely paying a portion of the health insurance premium. Under COBRA, the ex-employer does not always pay part of the insurance fee, leaving the total fee to be paid by the individual.

COBRA Benefits

People are not required to participate in COBRA insurance. It is not their only option for extending health coverage. However, there may be valid reasons to do so, such as:

• It's relatively easy. Although you do have to enroll, the forms are straightforward and there is no need for medical visits.


• Your coverage remains the same and preexisting conditions are still covered.


• Since your COBRA insurance covers preexisting conditions, if your new health care plan has waiting periods for a preexisting condition, COBRA can cover you during the waiting period.


• By participating in COBRA, you are also protected by the Health Insurance Portability and Protection Act (HIPPA), which offers you the assurance that, when your COBRA coverage runs out, health insurance companies cannot deny you coverage or impose waiting periods for preexisting conditions. This does not mean they have to charge you the same rates you were paying under COBRA; they can charge you a different, and probably higher, rate, but at least you will still have insurance.

Alternatives to COBRA

Although many people think that COBRA is their only option when they lose their job, it really isn't. While COBRA insurance provides a welcome safety net in times of personal stress, everyone would be wise to check out and evaluate their alternatives. Depending on your personal situation, there could well be a more cost-effective solution in those links. Some areas to be considered include:

• Alumni, fraternal, and professional groups can often provide group health plans that may cost less than COBRA.


• Accepting a higher deductible, higher co-payments, or reduced coverage can substantially reduce your premiums.


• Numerous companies offer short-term plans as an option to provide interim coverage.


• Removing dental care from your interim health plan can save on premiums.


• Major illness coverage rather than overall health care could be a viable alternative on a short-term basis.

Maintaining health care coverage is important for all of us. While COBRA does provide a guarantee of health care insurance, don't discount other options. Depending on personal circumstances (age, preexisting conditions), other options may be able to save you money at a time when it is tight.