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COBRA Coverage Popularity Giving Way to Short-Term Health Insurance Plans

The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows employees to continue their employer-sponsored health insurance if they voluntarily leave their job or are laid off or fired. But COBRA coverage is quickly losing favor. They are expensive, especially compared to short term plans.

A customer survey conducted by Pivot Health, a health insurance company, reveals that 75 percent of employees who lost their coverage did not choose COBRA because of cost. When an employee chooses COBRA they must pay the entire premium (both the employer’s and the employee’s cost) plus a two percent administration fee.

Thus, only 25 percent of those surveyed elected COBRA coverage. However, the survey also found that 46 percent of those surveyed selected a short-term plan.

A short-term plan is low-cost and low-coverage. It generally covers the services and treatments related to unexpected illness and injury, such as outpatient visits to the doctor, emergency room visits, hospital stays, surgeries, and related x-rays and laboratory services.

It is not the same as a standard health insurance plan and is not considered health insurance under the ACA. Applicants can be denied coverage for pre-existing conditions. These plans usually are available for one to three years, and unlike standard plans, have no time limits.

Also, several states don’t allow the sale of short-term plans, including California, Hawaii, Massachusetts, New Jersey and New York. Unless they become self-employed, most people who purchase short term plans expect to be fully covered again when employed by an employer with an ACA approved health insurance plan.

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