Bridging the gap in healthcare costs - COBRA and other affordable coverage options - Money Management

Black Enterprise, Feb, 1997 by James A. Anderson

If you're between jobs, COBRA can provide affordable medical coverage for you and your family. Here's what your former employer won't tell you.

THE DAY YOU LEAVE YOUR JOB MAY BE THE DAY YOU ASSUME A FINANCIAL BURDEN THAT IS TOO big tO bear--health insurance coverage. Robin White Goode knows this all too well, having changed jobs twice in seven years. Last year, she left her copy editing job at a publishing company to work at home as a freelance editor and writer. She quickly found that her wish to be closer to her four-year old Jamie and six-year-old David was going to put a big dent in the family finances.

To maintain health coverage for her entire family, including her husband Harley, an art instructor at a local university, Goode would have to somehow scrape together $500 a month. "As I looked into it, the situation looked prohibitive," she recalls. Goode opted for COBRA (Consolidated Omnibus Budget Reconciliation Act). Federally mandated in 1985, COBRA allows ex-employees to remain covered under their previous employer's health plan.

Whether you're fired, downsized or have left your job to set up your own firm, you might find that COBRA is just what you need to maintain uninterrupted health care coverage. On the other hand, staying on the company's old plan may be ideal for many,but it doesn't have to be the only option for health care coverage after you leave your job. With a little research and creativity, it's even possible you may find a better alternative to COBRA.

Goode, for example, found something cheaper after being covered by COBRA for two months. After consulting with insurance salespeople, her doctor and even professional groups that she and her husband belonged to, Goode, who is in her late 30s, switched her own personal coverage to a plan offered by the Independent Business Alliance (800-450-2IBA). This plan provides products and services to small and home-based businesses for an annual membership fee of $49.

Goode got individual coverage at $205 a month, while her husband, who is in his mid-40s, moved to a plan offered by the Graphic Artists' Guild at $180 a month. Finally, Goode signed her kids up for lowcost ($24 a month) childrens' coverage offered in New York state under Empire Blue Cross/Blue Shield. She was able to lower her family's costs from $500 to a total monthly outlay of $410. "We're now saving $1,000 a year over what we would have been paying, and that's no mean sum," she stresses. Since then, Goode is now considering saving $40 a month by becoming a part of her husband's plan--the single plus one is often a good option for married couples.

Goode's situation is all too common. But what sets her apart is that others don't bother to look at alternatives to COBRA. In most cases, the personnel or human resources department at your company will try to get you to pick up the premiums your employer once paid by keeping your health benefits, in addition to paying a 2% paperwork charge.

There are times, however, when that works out to be good advice. When Marissa Weddington found herself between jobs, she took what her company had to offer. After leaving her post as a job training expert at a nonprofit research center, in Washington, D.C., Weddington was notified that her COBRA benefits would run to $300 a month. Single and in her 20s, she discovered that individual policies were even more expensive, running in the $350-$400 range. "I couldn't do better than what I had, so I opted for COBRA," she says. "If I ever have to do it all again, I'll definitely look at COBRA first."

Still, you can expect a steep monthly health bill. On average, monthly premiums nationwide are $309 for a family of four, according to a survey conducted by the Chicago-based publishing firm, Charles D. Spenser & Associates. The survey found that only 19% of those people eligible for COBRA coverage actually opted for it last year.

"Most people go into sticker shock when they realize just how much they're going to have to foot in health costS," says Bob Parr, a senior manager of the insurance seller American Medical Security. He notes the bill can often mount to as much as $600-$800 a month for family coverage, depending on the area where you live.

If you find COBRA costs too steep, there are alternatives. "Many professional organizations, unions, fraternities, and sororities offer health insurance plans for individuals and family members," notes Richard Coorsh, a spokesman for the Health Insurance Association of America.

Nonetheless, COBRA is useful in that it helps you maintain coverage as you sort out your future during those nonworking days or months. In fact, it allows you to remain under your company's health care package for 18 months after you leave your job, extending 36 months of coverage to your dependents.

What the law doesn't guarantee is a bar gain. But given the excessive costs, it may be worth your while to examine viable alternatives. Better yet, with a little forethought, you can even tailor COBRA coverage to be less of a financial burden.