Affordable Short Term Health Insurance

Is it better to use COBRA or purchase an affordable short term health insurance plan?

If you have recently been laid off, there is a federal law referred to as COBRA that requires your employer's group health insurance plan to allow you to stay enrolled as long as you pay the premiums. This is very helpful so that you do not lose health insurance coverage and benefits. However, it may be fairly expensive because group health plans typically have high premiums, and your employer is not required to contribute to the premiums.

Instead, you may consider purchasing an affordable short term health insurance policy. If you are healthy, you may qualify for approval of an affordable short term health insurance plan. These have low premiums, and as long as you do not have a pre-existing condition, or need maternity care, you may benefit from one of the affordable short term health insurance offered by most large insurance carriers. However, if you are not healthy, or require prescription drug coverage, then you may not qualify for one of these affordable short term health insurance plans.

Although the premiums are low, affordable short term health insurance plans usually have a high deductible that needs to be paid before coverage begins. If your current plan does not have a high deductible, you will need to compare the possible costs risk between the two possibilities, your group health plan, through COBRA, or an affordable short term health insurance plan you purchase on your own.

There may be tax implications if you continue your group health plan with COBRA. The American Recovery and Reinvestment Act of 2009 allows you to receive a subsidy of your premiums. Check with a tax professional to see if you may benefit from any of the government plans to lower your expenses. Be sure to take this into account when you compare it with the premiums for affordable short term health insurance.

A risk factor of an affordable short term health insurance plan is that you are not guaranteed a renewal. If you file a claim against your affordable short term health insurance plan, you will probably not be approved for a renewal. Therefore, you would then be at risk of not getting any coverage.

It is important to keep track of having credible coverage, which means that you do not have a lapse in coverage of anything over 60 days. This affects your chances to have pre-existing conditions met by an individual health insurance plan. Typically, no affordable short term health insurance plan will cover pre-existing conditions. So we are talking about making sure you do not have a coverage gap between the affordable short term health insurance plan, and whatever regular health insurance policy you get next. That is why you need to be aware of the conditions that would prevent you from being approved for a renewal of your affordable short term health insurance plan before you have an alternative health insurance plan lined up.

So to determine what is best for you, COBRA continued coverage with your previous employer's group health plan, or an affordable short term health insurance plan, you need to compare the premium payments, the deductibles, and the other circumstances that will affect your future health insurance needs.