Unemployed: COBRA vs. Individual Health Insurance

With unemployment still at historic highs in many areas, a common concern is what to do about health insurance. A friend of mine was recently notified that he was going to be laid off, and so we talked about some of the options out there, and I told him I’d do some research about it since I had recently looked into an individual health plan.

About COBRA, Stimulus Bill Subsidy
COBRA gives people who lose their jobs the right to continue coverage under their group health plan. The catch is that workers must pay the entire premium themselves (plus a 2% administrative fee), which can be a lot higher than just the partial payment the employee usually pays. According to this WSJ article, the average cost of COBRA coverage for a family is $13,000 a year. In my friend’s case, he was surprised to see his corporate employer paid nearly $600 a month for his health insurance.

Keeping insurance continuity is important beyond immediate health concerns, because if you don’t have health insurance for more than 63 days, then even group health insurance plans can reject you later due to any pre-existing conditions. That can be a total disaster.

However, in February 2009 the “Stimulus bill” included a provision that would cover 65% of the COBRA premium for up to 9 months for people who qualify. You must have been involuntarily terminated between 9/1/08 and 12/31/09, and also not exceed an adjusted gross income over $125,000 for individuals ($250,000 for married couples filing jointly). According to this IRS page, there is no paperwork or extra tax return details to deal will; you just pay the 35% to your employer and let them handle it. In my friend’s case, this would lower his required payment about $210 a month for the next 9 months. That’s quite a discount!

Individual Health Plans
Still, if you are relatively young and in good health, you should be able to get a much cheaper health plan from many insurers. Group health insurance by definition has to cover everyone in the company, and may cover a lot more than you’d be willing to pay for yourself. However, you’ll have to familiarize yourself with some of the terminology. Here’s another quote from the WSJ article:

“My beef with Cobra is that it is the same gold-plated plan that my employer offered, when I would settle for copper or tin,” he says. Instead, he bought a catastrophic health plan, which covers only major hospitalizations, for $100 a month.

One of biggest comparison sites for individual plans is eHealthInsurance.com, which has a separate section on short-term health insurance plans. From their site:

Short-term health insurance plans provide you with coverage for a limited period of time, and may be an ideal solution for those between jobs or those waiting for other health insurance to start. Typically, short-term plans offer coverage up to six months, although some plans may offer coverage up to 12 months.

Indeed, I found basic 6-month plans starting at $50 a month, though they come with some hefty deductibles. As quote above, the idea here is just cover catastrophic events.

If you see the tab labeled “Help Me Choose”, I found the questionnaire there really helpful in narrowing down the choices. I figured I would want a temporary plan that would basically cover everything over, say $1,000-$2,000, but everything below that I would pay for, including doctor’s visits. The recommended plan ended up being a regular individual plan (not short term) that only cost $120 per month.

The annual deductible was $1,800, but I with 0% co-insurance (nothing above the deductible) as opposed to the 20-40% co-insurance on other plans. So the most I’d be out-of-pocket would be $1,800 a year. If there was no 65% subsidy, this $120/month insurance would beat out the $600/month COBRA option easily. Even now, it’s close. I could even add on a health savings account (HSA) and put more money away tax-deferred.

(The above is just an example. Your actual comparison results are dependent on age, sex, and location.)

Comments

  1. EBounding says:

    This is why health-care needs to be reformed.

    We either rely on our employer or the government for our health. Google “health-status insurance” for an interesting “free-market” way to reduce health care costs and cover everyone; even those with pre-existing conditions.

  2. This is what I thought until my childhood asthma resulted in a “waiver” for anything respiratory from a cold to the flu. It’s not an exclusion, it’s a waiver!

    Women also pay dramatically higher rates, especially in child-bearing years. My plan, with no maternity covered, was still four times my husband’s.

    Until you’ve actually done this, and applied, and all the phone calls, and all the legalese, you have no idea how truly bad individual health insurance is.

  3. I have an individual health insurance policy, which I got even before I was laid off. For $175 a month, my daughter and I are covered in a HDHP. We have an HSA for paying it, as well. My wife, however, also had asthma and was denied coverage, even after appeal. So she’s on a short-term plan also, but a different one with more leeway.

    Considering we are young and healthy, this is the best option for us. I would never consider paying COBRA and its ridiculously high rates unless there literally was no other option.

  4. As I’ve read stuff on plans to cover people with pre-existing conditions I always wonder, isn’t that counter to the fundamental definition of insurance? You insure yourself against the risk that you might get sick/injured. You can’t get “insurance” for something that already occurred. And it seems preposterous to require insurance companies to accept people with pre-exisiting conditions. Wouldn’t you just drop your coverage today and then go get coverage again when/if you became sick and save some $ by not paying premiums that entire time?

    An analogy I’ve heard is it’s like wrecking your car and then going to get car insurance to cover the wreck that already happened.

    Am I missing something?

    • Auto-insurance does not cover crashes but the costs of repair. It does not cover the reasons for crashes but the monetary consequences of them. By the same token, health-insurance does not cover illnesses. It indemnifies the costs to treat them. The “preexisting condition” trick (now prohibited — for all health-insurance policies, not just those offered on PP & ACA exchanges, I hasten to point out) is exactly the antithesis of the “fundamental definition of insurance” and rightly illegal!

  5. This is why I still love my high deduct and HSA. For the three years I have had it, I haven’t made a single claim, so my HSA has the deductible + a nice bit more in there. My insurance covers 100% over covered expenses after the deductible, so I also don’t have to worry about the costs after that. If you’re willing to eat the small costs and are relatively healthy, a high deductible emergency only plan is perfect…

    When I used COBRA, it came out to about $240 per month for me as an individual. I found a high deductible plan for <$100 and the deductible/12 (the max you could put into the HSA at the time) brought my monthly payment to the same as the COBRA plan, but with ~$160 of that going into savings every month instead of the insurer’s pockets.

  6. Thanks for this info… personally, I would just take the COBRA even if it costs more. I’d be too afraid that even with individual health insurance, there would be things that fall through the cracks if I truly need coverage. At least with COBRA, I’d know exactly what I’m getting.

  7. I also thought that individual insurance is a reasonable option. Until I heard about “post claim underwriting” phenomenon. Go ahead, google it up. I’ll wait.

    OK, I know you didn’t, so here’s what it is in a nutshell: you apply for coverage, you get the policy, you pay your premiums. And then you get really sick (or pregnant, even), and, naturally, submit a claim. This is where the fun part starts. The insurance company sees the claim (remember, you are really sick, it’s a BIG claim), and decides that they don’t want to pay up. So instead of paying, they redo the underwriting process, but this time they do their darndest to reject you. And, of course, they succeed. So they end up refunding the premiums you paid, and you end up bankrupt (or dead. Or both.) The practice is not really-really widespread, but it happens often enough for me to question the individual coverage as an idea. What’s the point in buying something if it has high chances of not working when you need it most?

  8. COBRA Insurance Advocate says:

    Although ehealthinsurance does allow you to compare rates, they only accept people in most cases with perfect health. Although this may be good for some, for the rest it is not only hard to get insurance, but may be impossible alone. There are laws that allow you to get health insurance as long as you remain continually insured. By going into a short term health insurance plan, you may destroy that possibility. Only by following strict guidelines will those people who have pre-existing conditions be able to get health insurance from a A rated carrier.

  9. Is there one that works for New York State? They only offer GHI and Empire for individual coverage, and no short term coverage at all.

  10. One problem with individual plans is that the insurance companies can change the terms. People who are healthy when the terms change simply go to another low cost plan, while people who became I’ll are then stuck with a now high cost plan.

  11. One other thing to keep in mind is that COBRA has a loophole that let’s you take your time making the decision. You have 60 days after losing your job before you have to elect COBRA, and another 45 after that before you have to pay. If you do elect, this is retro-active and covers you from the date you lost your job.

    Basically, if you lose your job, you shouldn’t elect COBRA for 60 days. I wrote more about this here: http://www.zanebenefits.com/blog/2009/08/141/7+Health+Insurance+Hacks

  12. My COBRA runs out 11/30 of this year. At that point, I’m completely up a creek as COBRA was by far my cheapest option. I’ve been denied individual insurance by just about everyone because I have moderate sleep apnea. It’s completely under control, but the insurance companies use it as an excuse to deny coverage. My wife had a C-section for our first child, so nobody will even consider giving us maternity coverage.

    It is absolutely crazy that health insurance is tied to employment. It kills entrepreneurship in America as the self-employed have no good options. Imagine if your car or home insurance were tied to your employment. (e.g. if you lost your job, you would be denied car insurance…) It makes no sense.

    I’m all ears if anyone has any good ideas for insurance for the self-employed…

  13. Maury, if you’ve been on COBRA this whole time, you’re almost certainly HIPPA eligible which means that your state is required by federal law to offer you some sort of guaranteed issue individual plan. These vary from state to state, so I can’t give you much more info. These policies are generally more expensive than normal individual insurance, but they shouldn’t be much more than your COBRA.

    Let me know what state you’re in and I might know where you should go to apply for individual coverage.

  14. I have been without health insurance for 1.5 months. I think you just convinced me to get a cheap plan since I am 25. Thanks!

  15. Consider calling your state’s department of insurance. My state (Washington) offers a consumer information hotline, staffed by well-trained specialists who provide accurate and useful information tailored to the caller’s needs.

  16. My wife actually got a short term plan via eHealthInsurance to cover a few months before we got married and could get her under my companies health insurance. If you’re unemployed then a short term plan would probably be a good buy. It was MUCH cheaper than getting a regular insurance plan. I think it was about 25% of the cost for the same coverage and same insurance company.

    I think the fact that the friend was surprised to see that their employer had been paying $600 a month is probably typical. I bet most people are unaware of exactly what the insurance costs. Thats one of the problems with our system. If everyone realized exactly what the insurance was costing and if it was their money then they would act differently with the money.

    A high deductible / HSA plan is also a good way to go. The high deductible keeps the monthly premiums low and the HSA gives you a good tax dodge. I’ve been on an HSA plan for over a year and its working great.

  17. Great post, Jonathan. A couple of points:

    @eBoundling – employers do not provide health insurance… the employees earn health insurance. It’s part of their pay… a big part. People seem to talk like those covered by employer plans are “lucky” … No, my employer made a conscious decision to hire me knowing full well that in addition to my salary they would be paying my health care and that of my family.

    @yd, @Jason… I agree with you and others who recommend that the high deductible + HSA is the way to go. The current situation in the USA, where people expect their health “insurance” to pay for every little expense, is a big reason costs are “out of hand” IMHO. An analogy would be expecting your auto insurance to pay for car washes… If that were the case, everyone would go to the $10 car wash once a week, and complain that their auto insurance costs are “out of hand”… Insurance is meant for unfortunate occurrences that one normally cannot afford, not everyday expenses.

  18. I am desperately in need of some help, and was hoping someone out there may be reading this and have an answer for me.

    I’m self-employed, wife is unemployed. I have my own private health insurance, and we were about to set my wife up with some too (just recently married, it was on our checklist), but now she is pregnant! We are so happy, but the celebration is cut short when it comes to insurance.

    Pregnancy is a “pre-existing condition” that these private helath insurance companies will NOT cover. They won’t even give us the light of day. I make too much to qualify for the low income insurance programs, and the ones that we do qualify for (MRMIP, for example) are underfunded and waitlisted.

    I was wondering if you think it might be possible to add my wife as a managerial member of my company, in which case we’d have 2 employees and qualify for group health insurance where no pre-existing condition can deny one of health insurance. What do you think?

    I mean, I have enough money to pay for a normal delivery, but that’s thousands of dollars that could be put towards my child’s education or a new house. What I’m really worried about is if something catastrophic happened, we wouldn’t be able to afford it.

    Any ideas? Please help! Thanks!

  19. @Warren

    That is correct when it comes to $$$ but one BIG difference.

    In individual plans, insurance companies and deny you for pre-existing conditions, and sometimes even cancel your insurance if something major happens. In an employer plan, they cannot do that. In an individual plan you often have no recourse.

  20. Its reprehensible that an insurance company would claim pregnancy is a “pre-existing condition.” This is a prime example of why we need a complete reform of the health insurance industry in our country. The whole business model of the private insurance companies is too deny coverage for medical care as much as they possibly can in order to maximize their profits. Not only is this immoral, but it can lead to people running up huge piles of debt, or denial of medical treatment for serious illnesses.

    The best answer to solving the insurance crisis is to get the private insurance companies out of the picture and adopt a single-payer system. Since this is not possible in our country (for a number of reasons), the next best thing is a public option. This would allow the uninsured and underinsured an affordable alternative.
    As we are seeing, getting this to happen is easier said than done. People need to wake up and stop buying into the myths and lies propagated by the health insurance industry and the far right. All the ridiculous claims they are making, such as the “death panels” and “bureaucrats getting in the way, ” ironically apply more accurately to the private insurance companies. I haven’t heard any rational arguments from the anti-health reform people as to why they don’t want reform. So anybody who is unhappy with their current insurance situation, needs to push for meaningful health care reform.

  21. Folks, the way we fund medical care in this country is absolutely broken. Anyone thinking that the status quo will be sustainable is just mistaken. I’m not saying that what the government is currently proposing is great, right or even workable in of itself, but frankly I’m glad someone’s addressing the elephant in the room at all.

    I think that this discussion would be enhanced by including some case studies about what happens if you really DO use your insurance when you need it. I recommend taking a gander at “The View from Your Sickbed” series of personal stories on Andrew Sullivan’s blog — FYI, I’m not associated with the blog. (http://preview.tinyurl.com/luh29k) Has anyone made claims while on individual insurance or COBRA? What happened?

    Yes, you can shop for individual insurance. And have an HSA. Planning should “theoretically” save you. But remember that there’s an increasing number of households that DID the prudent thing and still end up in bankruptcy because fundamentally insurers have a broken incentive structure. So be alive to the understanding that the biggest unknowable variable in any personal financial plan today is health care. You can fix your housing costs by buying at the right place and time. You can personally control spending on every other part of your life. Drive a clunker, eat generic food, whatever. But even if you chose a career with good health coverage, you’re one layoff and one accident/medical disaster away from trouble. We all are. And in this case, the medical insurer may not perform their basic function of shielding you from risks you can’t afford, because they can’t afford them either!

    To wit:

    1) There’s NO pricing transparency for medical procedures. How can you have a free market when you can’t even figure out your bill? Or ask for a quote ahead of time that the medical providers are bound to? It’s not like vision or dental, where the process is relatively well-defined in terms of risk. If the vision provider messes up, we’re disputing over one pair of glasses, for example. So the downside is relatively capped, for both provider and patient.

    2) It is much more profitable for insurers to deny your claims as long as possible because they can do that longer than you can remain solvent. And to make the original explanation of what is covered as misleading as possible. For example, if you read the Terms of a PPO, it may say “30% copay”. You may think, “oh, so for a $100 procedure, I pay $30. I understand.” No, that’s “30% copay of *customary charges*”. So if the insurer thinks that procedure should have cost $50, you pay 30% of $50 PLUS the excess — so $65 total if you got billed $100. And that’s a *simple* example of the kind of contractual shenanigans these companies can do.

    3) For all the talk of how digitizing medical records could save a lot of wasted spending, where is the incentive for the insurers to cooperate? Even if a given hospital sets this up for one insurer, they have to do all of it with every single insurer. For every single plan every insurer offers. How will we generate the political will to simplify how we bill for things? I don’t see it happening due to market forces, any more than labelling for “Nutrition Facts” or “Drug Facts” happened on their own.

    4) The information asymmetry between client and providers is enormous. From a potential patient not knowing what services are actually necessary, to whether or not various pieces are in-network (your doctor may be, but the lab or the radiologist/radiology department he uses may not!)

    5) Most of the spending on health care occurs in the last few months of life. The boomers are getting old. And they vote. Ever read “Logan’s Run”? The politics over this are not going to be pretty.

    Anyway, I tried to stay constructive in my contribution while conveying how vexed I am about it. Hope this is grist for the mill, and look forward to interesting perspectives others have to offer.

  22. @Pat,

    Congrats on the pregnancy. I’m guessing your company is sole proprietorship that might have different rules for appointing people as a manager / board member, versus for instance a LLC, I quite frankly don’t know. It’s certainly worth a shot though, and I would think you can manage something–one of the nice things about running a business is the added flexibility you get.

    Secondly, just FWIW, my wife miscarried a year ago and had a DNC. We have a high deductible insurance plan through my workplace and the bills for the DNC were ~$3500. (My office privately reimburses part of the deductible, though we still had to pay $2000 out of pocket). Stinks and gets expensive fast!

  23. Don’t undervalue the power your employer-based cobra plan has in actually delivering on its promises. If a lot of employees are ripped off by the plan, the employer will drop it. If one person with an individual plan is ripped off by an insurance company, they are of course hoping you will drop it.

    I have a individual high deductible plan with a “maximum out-of-pocket” of $5K that I thought was the ‘best deal’ for me. I have spent $15K this (bad) year due to (completely legal) balance billing-type reasons (insuarnce co. determines things after the fact are “investigatory or experimental”, etc. Makes no difference that me and my doctor disagree).

  24. @Chris

    Your comment gets at my earlier question. By what logic should an insurance company accept a person who is already pregnant and then cover her pregnancy costs? Insurance is coverage against future risks. If I can get insurance after I get pregnant/sick/etc then I’ll drop my coverage today, avoid paying the premiums, and then reapply one day after I get pregnant/sick/etc.

    @K

    I agree that it’s broken and I hope the national discussion continues. I truly hope that we do not go a single payer system though. I have no faith in the government to be an efficient and effective health care provider.

  25. @Chris & @Richard

    I somewhat agree, even though my wife is pregnant and doesn’t have insurance right now. But what about this? So someone who is pregnant and doesn’t have insurance should have to risk losing hundreds of thousands of dollars if something were to go catastrophic? That would be something that should insured, which we cannot get right now.

    My friend’s baby was born 2 months early, and was billed for over a hundred thousand dollars in hospital bills.

    We’re having a perfectly healthy pregnancy so far, but cannot find any insurance in case something like this were to happen.

    I hope that makes sense =/

    Thoughts?

  26. Great information. My COBRA runs out in two months and I assumed personal health insurance would be a financial impossibility. This breaks the whole decision down in understandable terms. Health insurance reform is indeed one of the biggest needs facing U.S. citizens. Unfortunately, the process has been co-opted by institutions with no particular interest in seeing this happen.

  27. @Pat

    I think I see what you are saying. You don’t necessarily feel that an insurance company should accept you and cover the “normal” costs associated with pregnancy (a couple days in the hospital, epidural, etc) b/c you didn’t have insurance before your wife got pregnant. But now that she is pregnant, you’d like to get insurance for the possibility that things go very poorly. That is a different question, and I have no idea if health insurance companies are set-up to offer policies on such specific circumstances. I’d be curious to hear the perspective of an individual that worked for an insurance company (like an actuary who could speak to risks and how they determine premiums).

    Best of luck in your current situation though. Sorry to discuss it on a board like this where the discussion is more theoretical and empathy is hard to convey.

  28. @Richard,

    Thanks so much, I really appreciate it. It’s tough because I’m doing my best to be happy and enjoy the pregnancy and the joy it will bring to my wife and our families – but the situation makes it a little tough sometimes. We’ll get through it. If anyone else has any information, I’d really appreciate it. Thanks for your support everyone :)

  29. the really amazing thing is that so many people are out on the streets protesting against the health care reform legislation that congress is working on.
    I really don’t get it.

  30. @sadhu:

    What don’t you get? If you believe that the healthcare legislation in anything like its current form would decrease options, increase debt (and taxes, etc), and ultimately result in inferior care for MOST people all the while being yet another reduction of our freedom, why would you NOT protest it?

  31. 4 years ago, when my husband took a year off to care for our new baby and older child we took on an individual health insurance plan. It was about $1,000 month and frankly, I thought that was a good deal. That covered all four of us. I worked through that time but I am self-employed. It was a low-deductible plan with a max out-of-pocket number that fit well with our needs. I was not at all upset about paying $1k per month for insuring us all. What I think is scary is not having insurance at all if I were to be denied for any pre-existing conditions. I’d much prefer getting rid of insurance and getting into a private family practice where I pay them directly and they take care of anything that comes up.

  32. @sadhu

    What don’t you get? If you were an insurance company and your profits were being threatened by a potential legislation, wouldn’t you do anything to try to defeat that legislation before it even gets to the Congress? Don’t underestimate the power of the health insurance lobby. They have had a very profitable game going on for decades. I am convinced that they will prevail once again in defeating the common sense and keep denying those claims for greater profit. That is why I am a shareholder of a couple of insurance companies. When you can beat them, join them. The dividend I make on my investment helps me pay for my private insurance. That’s called capitalism.

  33. I’m pretty disgusted with health insurance. After being laid off last Nov. I was paying almost $1200 a month for my family insurance. Come last Jan. I had a mole removed…it turned out to be “early stage melanoma” and I am now essentially uninsurable (for good coverage at a low price) for 7 plus years! Thank goodness I’ve recently started a new job. The federal relief was a big help bringing my $1200 per month down to $400. Isn’t it lovely that insurance companies can choose who to insure? Another month of unemployment and I would have had to go uninsured myself.

  34. Sparky,

    Forgive my ignorance, but could you explain your situation in more detail? Why are you “essentially uninsurable” for 7 plus years now (why 7 years?)? Your message seems to say that you’ve been continually insured and didn’t have problem getting insured through your new job? So i guess you meant you have to pay more than a person without health issues? I’m just curious how the situation works out…the intricacies of individual/group, preexisting,etc are complicated. Thanks!

  35. Interesting discussion. I’m actually very close to being in Pat’s condition. (Our COBRA is running out and we WANT to have a kid.)

    Alas, my wife’s last pregnancy resulted in a C-section, so no one will provide us with individual coverage that covers maternity. Many have “Maternity Riders” you can purchase, but they cost something like $150 a month, with the provision you don’t get pregnant for a year. On top of that, the max they will pay out would be something like $2,000 regardless, so essentially, you loan them the money to give back to you and you still don’t have coverage should anything bad happen. They word it as such that you think you are covered for a pregnancy, but reading the fine print you find out you aren’t at all.

    I have a small sole proprietorship I run on the side here in TX, (Jonathan did an interview here: http://tinyurl.com/lznuu9 ) and I’ve considered adding my wife as an employee to be able to apply for group coverage through the state. It is expensive, (More than our COBRA which is $1,000/month) but it would be something. Trick is, you need to show something like 3 months of paychecks or something and they need to work full-time. I would have to have my sole proprietorship go through the hassle of generating paychecks with FICA, etc. (All from a biz that doesn’t even generate $1,000 per month), so I would constantly be loaning the biz money to pay the premiums and taking a loss on that particular side biz on my Schedule C.

    It’s a very convoluted work around and I’ve been avoiding that approach if I can as I’m still not sure it will work. Still, gaming the system to get group health insurance may be the only solution this entrepreneur has…

  36. So a single payer system is not possible because everyone hates the government. Let’s put aside the implications of what that means about the deplorable state of our democracy and ask this question: does the single payer have to be the government? Why not a national non-profit health insurance organization independent of the government?
    Is such a thing possible?

  37. System is definitely broke!

    For those on West Coast and a few other place (like Colorado?) check out Kaiser – very affordable, and usually better coverage than most anything else, anyway.

    Isn’t COBRA simply what your employer pays? People are getting a huge wake up call as to why so many employers can’t afford to offer decent, if any, benefits.

    We have personally always self insured. The invention of the HDHP/HSA option has made our insurance far more affordable – our premiums had been increasing 10-30% every year before (and capped about $900/month for family – now we pay $550/month with $3k deductible/out-of-pocket annually – which isn’t bad – deductible used or not – haven’t used it yet – knock on wood).

    Anyway, I feel a lot of benefit being able to have private insurance. Reason we have it? Never offered anything worthwhile by an employer. For now my employer would cover me for some abyssmal, insane-high deductible plan, but to add my family would cost more than out private insurance anyway. But, I definitely appreciate that my insurance is not tied to employment.

    This is what I don’t understand about the pre-existing thing. My parents have had the same insurer for the last 30 years or so – my dad works in a volatile industry and has worked for about 10-20 employers over the years. He has jumped from health plan to health plan with the same insurer and his COBRA is actually a very reasonable amount (a few hundred a month)? He recently inquired about switching to a private plan, as he considers early retirement (he is 57). Insurer tells him that would be entering a “new plan” with pre-existing conditions. Mom has Type 2 diabetes – he has sleep apnea. Not a lot going on otherwise (though I totally understand diabetes is risky). Anyway, quote, $30k per year. Worse, he decides he better work to 65 and has since had some serious health problems. He is facing unemployment at 57, and no option but to pay like $50k per year now for health insurance. Though it’s the same insurer he has always had. It just doesn’t make any sense to me.

    I think I’ll KEEP my private insurance, thanks. God forbid if the insurer goes under or I ever miss a payment. !! But if I can afford it, it seems like the best option (not at the whim of employment). I mean – do you know anyone in their 50s without a pre-existing condition. Let’s be serious – it doesn’t take much.

  38. @Donald, “a single payer system is not possible because everyone hates the government”
    Most americans hate Medicare?

    Many universal health care systems have private insurance, Switzerland and Germany comes to mind.

  39. @Alexandria -

    No, COBRA is not “what your employer pays” … Look it up, Jonathan has a convenient link in the main story.

  40. @Warren,

    COBRA is what the plan actually costs (your regular portion + what the employer pays) with up to 2% admin fee tacked on (so we’re talking single digit dollars much of the time). Since you disagreed with Alexandria, what are you claiming it is?

  41. @Kuzbad, @Alexandria,

    OK I see the point. Perhaps poorly worded by Alaxandria and misunderstood by me.

    The COBRA dollar amount per month is indeed what the employer would pay, if the person was employed, +2%.

    However, COBRA is for ex-employees. Therefore, COBRA actually is “what the ex-employee pays”, not “what the employer pays”. In other words, if the employer is paying it, it’s not COBRA.

  42. @Richard,

    I hope you have read Alexandria’s comment to clear up your understanding of the problem with “pre-existing condition” exclusions. While I agree with your general notion of it being wrong to cover something that already has happened, because people will just wait until they have a problem and then buy insurance, I believe most proposals that prohibit pre-existing condition exclusions also include a mandate to purchase insurance for just that reason.

    I have a similar situation to Alexandria’s father. My wife and I (and our employers) have paid into a variety of health insurance plans continuously for over 20 years, not counting the nearly 30 years that our parents paid into such plans. My wife (who our employer insurance came from) lost her “regular” job this year, and she is now self-employed. We are paying COBRA, for one simple reason – our 12-year-old daughter has Crohn’s disease. We simply can’t get an individual policy at this time which will cover her illness if she should have a problem. It’s situations like hers and Alexandria’s father’s that we all pay for insurance in the first place, and now we can’t use it.

    I’m hoping that things change before we are no longer eligible for COBRA, but I’m getting scared it won’t. I think the problem is folks don’t think things through, or they just aren’t aware of how it works outside their employer provided coverage – I know we didn’t think about it much. They’re happy with what they have, and don’t want to have that messed up, but they are unaware how much trouble they would be in if they were to lose that job and coverage – hey, that great $4/month generic drug price you get at Walmart for your high blood pressure? It doesn’t seem like that big a deal, but that condition’s gonna cost you big-time for a new insurance plan.

    Tim

  43. @Richard,

    Also, if you haven’t already, read the Wall Street Journal article Jonathan linked to. You can get the story of the couple who GOT DIVORCED so the husband could continue to get coverage under COBRA for his diabetes.

    It’s madness, I tell ya….

    Tim

  44. I am also glad the govt is looking at reform. At few thoughts:

    -The present system cannot scale. I don’t know all the answers but I do know people on average are going to the doctor more frequently than 20-30 years ago and living longer. Services will have to be cut but I’m like most Americans, I love change unless it affects me.

    -Some of you that are so venemously against reform, I hope you never get seriously ill without adequate coverage. (you can even go broke with adequate coverage)

    -I’ve been in the computer industry for 30 years and have had excellent insurance but I know I will retire and insurance won’t be as good. (insurance = premimums, deductibles and coverage) I think some people don’t believe they will get old or sick.

    -Medicare, love it or hate its still the best game in town at 65. Also for all of you against “socialized” medicine, medicare is socialized medicine. Yes, I know you pay in but its a fraction of the costs. The average public hospital recieves 40% of its revenue from medicare. Also, you better go to a doctor that accepts Medicare. (not all do)

    -Medical reform should not be political. For all the Obhama bashers, where were you when Bush was passing his perscription drug program? I for one want to listen to all educated analysis from both sides of the issues.

  45. qwerty,
    Sorry, I always forget that irony falls so flat in print. I was simply referring to all the hysterical opposition that even the notion of government supervision of insurance has brought on, let alone the prospect of a government single-payer system. I would like to see such a system, which, with all its pitfalls, would be much better than what we have now. As far as Medicare is concerned, I recently heard of protester saying to a member of Congress that they wanted the government to keep its hands off Medicare. If that’s not hysterical, in more ways than one, then I don’t know the meaning of the word. I’m just hoping for a way to circumvent the hysteria and achieve something that will work for everyone.

  46. Be very careful in considering short term health insurance.
    From ehealthinsurance: “At the end of your coverage term, most health insurance companies will allow you to re-apply for another short-term plan. These plans do not typically constitute an automatic continuation of your first plan. Many short-term health insurance plans only allow you to re-apply once.” And after that you won’t have any insurance unless you can pass underwriting again.

    Also ehealthinsurance says “If you recently lost health insurance coverage through an employer, purchasing a short-term medical insurance plan will make you ineligible for any guaranteed issue, individual health insurance plans commonly referred to as HIPAA plans.”

  47. @Kuzbad

    where do you get the info that reform would “decrease options, increase debt (and taxes, etc), and ultimately result in inferior care”?

    If anything we would have more options and care should get better since doctors won’t have to get approval from insurance companies for every little treatment they recommend.

  48. Kuzbad, what I meant about being uninsurable for 7 years is…that is the shelf life of a “condition”. Essentially a pre-existing condition exists for about 7 years…unless something similar reapears…then it’s seven years from that incident. I was lucky enough to get a full time gig, and have insurance now (with pre-existing conditions also not coverable). However since my wife also has a pre-existing condition (as had a c-section) we will be on the hook for any more issues such as melanoma or difficult pregnancy. So I’m covered as long as I don’t get the same thing twice (including pregnancy). Since my first child was 5 wks premie…and hospital bills were over $160k for a 2 week stint…the insurance companies are pretty much forcing us to have one child. Or we could roll the dice and hope for the best.

  49. @Sparky, thanks for clarifying. Can’t say I understand the situation w.r.t. the pregnancy though, but it doesn’t sound ideal…

    @sadhu: It’s exactly like Obama said at his town hall the other week–since when is the government more efficient than private industry? Roughly quoting Obama, Fedex and UPS are doing fine, it’s the post office that is always having problems. Fedex and UPS offer products and services at a price that the subsidized post office can’t begin to compete with. You now expect government insurance to be the epitomy of efficiency?

    Your perhaps most shockingly ignorant / disingenuous (sounds more ignorant than disingenuous to me) statement is “doctors won’t have to get approval from insurance companies for every little treatment they recommend.” That’s so laughable it makes me wonder how exactly you think the system is going to work. How on EARTH is that going to work? The government will automatically allow ANY procedure? You think it’s bad now, wait till doctors get paid for recommending every single test and every single procedure that could conceivably be allowed knowing that it will be automatically approved.

    If you really think that’s going to be the case, I suggest you go listen to Obama speaking about his deceased grandmother’s hip replacement. Perfect example. For that matter, listen to him talk about doctors ordering too many tests, and ordering the most expensive procedures possible (for instance when he claimed doctors maliciously removed tonsils when they knew all the patient REALLY needed was allergy medicine)

  50. I didn’t see anyone mention a key concern in the COBRA vs. individual insurance decision. Under HIPAA, if you’ve been continuously covered under a group plan, your next group plan must cover all pre-existing conditions. If you have a break of at least 63 days from group coverage, then your next group plan can impose a waiting period on pre-existing conditions.

    So, if you lose your job, and stay on COBRA (and on state insurance when COBRA ends), any pre-existing conditions will be covered by your next group plan. If you go with an individual policy, and then switch to your next employer’s group plan, you’ll have an “exclusion” period to work through.

    If you already have a serious condition, you probably won’t get an individual policy anyway. But suppose you’re healthy now, and develop something serious while you’re on an individual plan. You are then potentially out of luck for several months when you go back to group covered.

  51. RB @ RichBy30RetireBy40 says:

    Great post. If and when I retire in my early 40′s, I have baked in $1,000/month in healthcare costs for my wife and I until 65 when Medicare kicks in. However, the way Obama’s Health Insurance revolution is going, perhaps we’ll get to save some money on monthly premiums!

  52. @Jim,

    I believe you are wrong about the pre-existing condition coverage with an individual policy. From the Department of Labor website (http://www.dol.gov/ebsa/faqs/faq_consumer_hipaa.html#CreditableCoverage)

    “Can I reduce or eliminate the maximum preexisting condition exclusion period?

    “Yes, if you can show ‘creditable coverage.’ Most health coverage can be used as creditable coverage, including participation in a group health plan, COBRA continuation coverage, Medicare and Medicaid, as well as coverage through an individual health insurance policy.”

  53. @Pat, I’ll be the un-ethical person here by saying this, but did you ever consider getting a quickie divorce to allow your wife to qualify for low income coverage and then re-marry after the child is born? It may not actually work either — but isn’t it strange that she would have more options if you weren’t married? Anyway, they always say that the two most expensive times of life (medically speaking) are being born and dying, so it’s pretty obvious why the insurance companies would list pregnancy as a pre-existing condition. However, I think under a state-run plan, she would qualify automatically anyway, as long as she had no income.

    BTW, I think Obama is wrong. And the Post Office is run pretty well, if you ask me – they are the best deal in town. They are just having troubles now because of the decrease in mail volume (due to the internet). I wouldn’t leave the insurance companies in charge at all — I would get rid of them all and nationalize healthcare.

  54. @mimi, Hmm…that’s a very interesting thought. She should definitely qualify for low income health insurance here in California. Thanks for your thoughts. I hope we don’t have to resort to this, but it may be our only choice.

  55. After reading most of the posts. The problem doesn’t seem to be with health insurance. The problem lies in the cost of medical procedures. It’s crazy expensive to fix you when you are broken and nobody wants to pay for it.

    People turn to insurance to cover them when they need it and the insurance company doesn’t want to pay for expensive procedures because it would put them out of business (or hurt the bottom line).

    If it were possible to bring down the cost of health/medical PROCEDURES then insurance have to follow.

    So how about addressing the cost of procedures instead of the cost of insurance because the underlying problem is the cost of those procedures. This is the problem I have with the current legislation. It doesn’t really do anything to address the real costs.

  56. @Robert,

    The Japanese government has a book that lists all the prices for every procedures. Doctors and hospitals charge patients according to the price in the book. As the result, Japaneses get great care at a very low price but their hospitals are going out of business.

  57. Jonathan,

    Remember your article on umbrella insurance? Treat health insurance the same way. I have a plan with a $5,000 deductible, no maternity and no prescription coverage. This is because I am only 25, don’t plan to have kids, healthy and don’t make heavy use of prescriptions. This all brings my premium down to $53 in my area.

    Now, in the event of a car accident or broken leg, I won’t have to shell out $5,000. What people need is what’s called “accident insurance” as a supplemental plan. It’s real cheap. I have a plan that provides $10,000 coverage for accidents, unintended injuries and dismemberment. It costs just $27/mo. The deductible is just $100. So, if I get in a car accident or break a limb, I only have to pay them $100. The $5,000 tab is covered by the accident insurance company. Plus, there’s an extra $5,000 paid out that is left over. I can use it to get alternative therapies, cosmetic restoration for scars or other things that are not covered by my regular insurance plan.

    The only event I’ll end up shelling out $5,000 is if I get some rare disease like cancer or my health suddenly degrades. Since I’m young and healthy, I take advantage of the moment and put the cash difference into my HSA high-yield savings account with Alliant Credit Union, earnings a safe 4% tax-free yield. Since I am still saving $200/mo on what I otherwise would pay out in premiums, I’ll meet that $5000 mark in no time.

  58. Best Option –

    I have been living/working in HK and moving back to DC to live with my fiance which has insurance the problem is that I would have to wait 10 months before I could try to get pregnant but we want to try right away as I am 37 yrs old….tick, tick, tick.
    I was looking into Kaiser Insurance(out of the Washington DC area) and they gave me a quote of $237 which sounds great– perhaps too great as my brother told me that does not add up as people my age pay double through Cobra….I wish we had easier options in the United States. I am in good health and can wait 10 months but truly want to start the process sooner rather than later. Should I play it safe and go for CareFirst which has the WORST customer service but know that they will not kick me/my fiance out OR do I go for Kaiser and hope that I am not one of those victims of being denied health care. Appreciate your input.

  59. hi,
    I was wondering if anyone has more information on how to continue coverage after 18 months of COBRA? Is it basically guaranteed coverage through HIPAA? How do you find out more about how to do this. I live in PA now, but may be moving to CO if anyone has any information on how this would work in PA or CO. thanks a lot. there is a lot of great info here.

  60. Ami – Here’s a possible approach: Take a look at http://www.healthinsuranceinfo.net – where Georgetown University publishes its “Consumer Guides for Getting and Keeping Health Insurance” for each state. After selecting a state’s guide, look at the page entitled “How Am I Protected” and see what it says if you are “HIPAA eligible”. Armed with this knowledge, I’d call the state insurance office and talk to a consumer advisor.

  61. You wrote, “In my friend’s case, this would lower his required payment about $210 a month for the next 9 months. That’s quite a discount!” Yeh, it is, but someone is going to have to pay for it. That is the problem with all this stumulus stuff and Obamacare. There is no free lunch!

  62. I just wanted to add an updated comment since most of the subsidy talk is no longer applicable to the conversation. From what I have experienced – paying $1250 for a family plan with COBRA – and then switching to a private plan for everyone in my family except for my husband with a preexisting condition, we saved $700 a month. I would recommend reading this for some money saving ideas. http://www.cobrainsurancedirect.com/COBRABlog/tips-for-cutting-monthly-cobra-insurance-expenses/ I find a lot of good ideas, including using the Independent Election Rights to only sign up my husband for COBRA.

  63. Great article, even here in 2012!

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