COBRA is available only if you worked for a company with 20 or more employees, had health insurance through your employer and your former employer is still in business. The idea of COBRA is that you piggyback on another group plan. If that plan doesn't exist because the company went under, there is no COBRA.
If your company offers COBRA, sign up -- whether you can afford the payments or not. Here's a little-known insurance fact: Once your employer notifies you of your COBRA rights, usually via a letter mailed at or near the time of layoff, you have 60 days to enroll, says Fronstin.
From the day you enroll -- by filling out a COBRA form and mailing or faxing it to your employer -- you have exactly 45 days to pay the premium. But watch the calendar -- if you mistime your calculations by one day, you're out in the cold.
Bottom line: From the time you leave your job, you have more than three months to get another position, find a better insurance deal on your own or get a part-time job to make the COBRA payments. But if you do have a calamity, chances are that COBRA premium will be a lot cheaper than the hospital bill.
"It's tough medicine because when you're laid off it's really a challenge to pay those COBRA bills," says Gail Shearer, director of health policy analysis for the Washington, D.C., office of Consumers Union, the group that publishes Consumer Reports magazine.
Option 2: Your spouse's planObviously, this is not an option for everyone. Compare the cost and the coverage to what you would have with your own COBRA plan. Does it offer what you need? One big plus: If you're moving from one group plan directly to your spouse's plan, you can't be excluded for any pre-existing health condition, such as a pregnancy.
Before you sign on the dotted line, ask yourself two questions:
- How stable is your spouse's job? and
- How strong is your relationship?
If your spouse gets sacked, both of you will be stuck with the COBRA version of your spouse's plan. Ditto if you divorce. If either of those scenarios is an issue, it might pay to compare your COBRA plan to your spouse's when you evaluate your initial options.
Option 3: Individual insuranceShopping for an individual insurance policy is a lot like buying a car -- only more confusing.
"It's kind of daunting," says Christopher Trela, 34, who was laid off in September. When his company went out of business, COBRA was no longer an option. "For the first time, I have no health insurance," he says.
Trela is one of the lucky ones. He's survived the layoff and is building his own multimedia production company, TRELA Inc. But he admits he still hasn't dealt with the health insurance issue.
"I want insurance right now, but have no idea how to get it," he says. The cost of no coverage hit home recently when he realized that it was time for his annual eye exam and probably a new pair of glasses.
"I thought, 'Boy, that's going to cost me several hundred dollars,' " he says.
Best advice: Start shopping for health insurance as soon as you lose your job. Whether you're going to build your own business, temp or look for a new position, make securing health insurance a priority.
Again, your state insurance commissioner's office is a great resource -- and one of the few that doesn't have a financial stake in your decision. They can tell you about complaints against a company, the firm's reputation and its financial stability. Be realistic -- virtually all insurance firms will have had some complaints.
Make a list of insurance companies or HMOs you want to investigate. Don't know where to start shopping? Call the company that your former employer used, if you liked the coverage. Ask friends and family members what companies they use -- and if they are satisfied. Check with your doctors to learn what plans they honor. That should give you a good start.