{"id":158,"date":"2012-04-19T19:01:24","date_gmt":"2012-04-19T19:01:24","guid":{"rendered":"\/articles\/?p=158"},"modified":"2013-05-13T16:14:51","modified_gmt":"2013-05-13T16:14:51","slug":"cobra-and-short-term-policies","status":"publish","type":"post","link":"https:\/\/www.online-health-insurance.com\/articles\/analysis\/COBRA-short-term-policies.php","title":{"rendered":"COBRA and Short-Term Policies"},"content":{"rendered":"

We\u2019ve been getting a lot of questions lately from people concerned about losing their current health insurance coverage before the \u201cguaranteed\u201d coverage provided by the Affordable Care Act (ACA) becomes available. If it actually does.<\/p>\n

Some of these letter-writers say that their employers plan to discontinue coverage, whether or not the ACA is overturned by the Supreme Court or repealed by a future congress. These questions seem to reflect a general anxiety about the current state of the health insurance marketplace. And a few sound a bit like urban legend\u2014most polls on the subject indicate that employers do not plan to cut health coverage this year or next. (Or, at least, they won\u2019t admit such plans to pollsters.)<\/p>\n

Regardless of anxiety or opinion polls, the fact is that various laws at the federal and state levels make it difficult for employers to discontinue health insurance benefits, once started. But, in the interest of clearing up confusion, we\u2019ll answer the main question: What happens if your employer decides to cut off your health coverage? For starters, the decision probably won\u2019t take effect immediately. The federal Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) applies to all companies with more than 20 employees and controls how insurance benefits are managed.<\/p>\n

COBRA is most relevant to insurance consumers because it requires employers to make existing coverage available to former employees, in most situations, for between 18 and 36 months after the employee becomes \u201cformer.\u201d<\/p>\n

COBRA coverage isn\u2019t free to the former employee; you have to pay your former employer the monthly premium (plus up to 2 percent more to cover the former employer\u2019s administrative costs). This can be expensive, especially if the ex-employer has an older employee population and is paying a higher group premium. But the former employer must<\/em> make the coverage available; and, for people with health problems, COBRA coverage is often a better deal than individual-coverage alternatives. COBRA rules also apply when an employer decides to discontinue health insurance benefits. Effectively, the law requires the employer to give employees advance warning of the discontinuation\u2014and must make the benefits available for at least the COBRA-minimum 18 months available to former employees.<\/p>\n

If you\u2019re in good health, COBRA coverage may not be so important. You may be able to buy any of several types of individual health policy for the same price. Or less. But, as we\u2019ve noted, if you are (or have a dependent who is) in poor health or have pre-existing conditions, keeping COBRA coverage will usually be your best strategy.<\/p>\n

The 18- to 36-month COBRA period is intended to give you enough time to search for either a new job or an individual policy that suits your needs. The key here is to make sure that you start that search right away<\/em>\u2014especially if you have a health history that will make finding good individual coverage difficult. The goal, from the beginning, should be to have a solid solution in place well before you run out of time on COBRA. We hear from many letter-writers who wait until their COBRA coverage ends to start looking for other coverage. That\u2019s dumb.<\/p>\n

One last note on COBRA coverage: The federal law allows individual states to follow their own laws instead, as long as those state laws at least match standards set by the federal version. For example, Connecticut state insurance law (CGS \u00a7 38a-538) requires employers to allow \u201cindividuals to elect to continue coverage under a group plan pursuant to federal extension requirements established by\u201d federal COBRA. And, if an employer decides to discontinue health coverage, it has to wind down the benefit over a period of at least 18 months. So, check with your state\u2019s Department of Insurance about which laws apply. But the fact is that, because of COBRA\u2019s long wind-down period, many employers trim away at coverage rather than eliminate it altogether. Or they pass a greater portion of premium payment to employees, often under the rubric of \u201ccost-sharing.\u201d\u00a0 Still, if your employer does<\/em> end all health insurance coverage\u2014or if its COBRA coverage is extremely expensive\u2014you can buy yourself additional time to find a long-term solution by using short-term or \u201ctemporary\u201d health insurance coverage.<\/p>\n

(At this point, some nit-picking readers may point out that all<\/em> health insurance is temporary, since it\u2019s usually set up on a one-year term. But, as we\u2019re about to see, the insurance industry considers \u201ctemporary\u201d to mean a policy with an ever shorter term.)<\/p>\n

Some common traits of short-term health insurance:<\/p>\n