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The COBRA bridge.

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The COBRA bridge

Between COBRA and HIPAA, you'll be able to get insurance if you lose your job--as long as you follow all the rules exactly

If you've joined the ranks of the unemployed (or are worried that you will), certain legal protections guarantee that you can maintain your health insurance coverage. The catch: They are expensive to activate, and the rules can be confusing. First, under COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1986), if your company employs 20 or more people, it must offer you insurance for up to 18 months if you leave your job for any reason other than gross incompetence. Your former employer is not, however, required to pay any part of your premiums. You may have to shell out as much as 102% of the premiums. (Yes, you even pay the 2% administrative costs.) So if you were paying $2,400 a year for family coverage, you may face a gut-wrenching $9,200 bill. Tough to manage if you don't have a job. The upside? The coverage under COBRA is seamless, you aren't subject to underwriting exclusions or waiting periods, and it wilt probably be cheaper than what you can get in the open market. (You have 63 days after leaving your job to sign up for COBRA.)

The second protection you enjoy comes from HIPAA, the Health Insurance Portability and Accountability Act, passed in 1996. HIPAA allows you to obtain group coverage from a new employer without having to satisfy a waiting period for pre-existing conditions. The only requirement is that you've had 12 months of "creditable coverage" and haven't been uninsured for more than 63 days. If you don't get a new job promptly, you have the right to buy an individual policy. But you must follow two rules. The first: You must use up all of your COBRA benefits before trying to sign up for an individual policy. The second rule: When your COBRA runs out, you must get a new policy within 63 days. The consequences of failing to pay for COBRA for the full 18 months or missing the 63-day limit are serious--you may be turned down for past health problems or your coverage for pre-existing conditions may be excluded or delayed.

BOTTOM LINE If you're worried about losing your job, consider signing on to a cheaper plan during open-enrollment season; that could make the COBRA bite easier if you do become unemployed. (Ask your plan administrator about total premiums.) If you're married, think about getting family coverage from the plan of the spouse who's more likely to stay employed, even if the terms are not optimal. And if you are unemployed, do whatever you can to maintain your COBRA coverage--and pay on time every month lest your coverage be stopped--or your ability to get affordable and comprehensive coverage later may be affected.

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