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What is Better For The Unemployed? Short Term Health Insurance or COBRA?

Suddenly losing your job can be alarming. One moment your life is humming along, and the next it is abruptly placed on hold. How will you pay your bills? Is there enough in your savings account to get by until you find another job? What happens when you lose your health insurance coverage?

With the loss of employment, COBRA mandates that employees who lose employer healthcare coverage can elect to stay on their former employer’s health insurance plan for up to 18 months following the end of their employment. (There are special circumstances when this isn’t the case, but it’s rare.) In the case of divorce from the former employee or death of the former employee, the spouse’s coverage may continue for up to 36 months.

A recent LA Times op-ed outlined one man’s funny plight in enrolling in a COBRA plan after leaving a job. Online enrollment didn’t work and customer service couldn’t answer his questions. He needed medical treatment, but he was nowhere to be found in the system. After weeks of suffering physically, the author’s COBRA insurance was finally effective – just in time for his medical condition to (thankfully) clear up.

Short term health insurance would have saved this individual time, a lot of money, and gotten him in to see a doctor within 24 hours of enrolling in a plan. Some of the top features about short term health insurance include:

  • Price. Short term plans begin at about $90 a month, and if the individual doesn’t qualify for a subsidy on an Obamacare plan, short term insurance can be hundreds of dollars less every month. COBRA plans are full retail price, and do not qualify for any cost assistance.
  • There are no provider networks to worry about. See any physician, use any hospital.
  • Enrolling takes about 8 minutes. Enrolling in a COBRA plan requires the individual to re-enroll in their employer plan. Enrolling in an Obamacare plan takes 1 hour or more, depending on subsidy qualifications.
  • Once a short term plan expires, most states allow individual to enroll in another short term plan for up to 12 months (364 days, technically).

COBRA is a good option for individuals who have already have medical bills that are nearing their yearly deductible, and additional medical services or prescription drug costs during the year would get them past their deductible limit. Even though you have to re-apply for COBRA coverage, it picks up right where the employer policy left off. For example, if an individual has a $5,000 deductible and has already had $5,100 in claims placed against the deductible at the time they lose their job, any out-of-pocket costs for additional medical services for the rest of the year will be greatly reduced in cost if they enroll in COBRA. Since the deductible is met, the health insurance company will most likely pick up much of the tab for any additional medical claims.

Short term health insurance can be in ideal solution for those looking for a cheaper alternative to COBRA or those not wanting to commit to a permanent Obamacare plan. The best news? There is no tax penalty for up to 3 months for not having a qualifying major medical plan, giving short term insurance policyholders the opportunity to get back on their feet financially without breaking the bank.