Filling a Health-Coverage Gap
Gaps in health-insurance coverage can open under many circumstances. You changed jobs and the new insurance doesn't become effective immediately; you just graduated from college, can no longer be covered under your parents' plan and have not yet lined up a job with health benefits; you're between jobs, and don't know when you'll work next.
Even the smallest gap is cause for anxiety, since unexpected hospital bills paid entirely out-of-pocket can be financially draining.
Fortunately, many short-term options are available. Some people choose to continue their group health coverage when they leave a job under requirements set forth by the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Others obtain temporary continuation of their coverage as set forth by state laws. Still others buy an individual short-term plan.
Knowing the pros and cons of each option can help you decide upon the plan that's best for you.
"COBRA is a federal law that covers private- and public-sector group (health) plans with 20 or more workers," says Paul Fronstin, senior research associate at the Employee Benefit Research Institute (EBRI) in Washington, D.C. The goal of the law is to relieve hardship imposed on workers and their families when they leave a job by providing a transition period before other coverage becomes effective. Under COBRA, employers with health-insurance plans must offer continued access to group health insurance to qualified persons if they lose coverage as a result of a "qualifying event" -- such as when a worker's employment ends for reasons other than gross misconduct.