COBRA vs. short term medical insurance

TA | January 9, 2009

Q: What is the difference between COBRA and short term medical insurance for coverage while unemployed?

A: COBRA insurance covers pre-existing medical conditions and is therefore very expensive. Short term medical insurance covers only new medical issues that arise during the period of unemployment. It is much less expensive, perhaps 1/3 the cost of COBRA coverage.  COBRA is only available through a former employer; short term medical insurance is usually purchased online at sites like www.MedSave.com.

The names can be deceiving. COBRA is usually limited to 18 months of total coverage whereas short term medical insurance can often be extended to three years of continuous if necessary.

Both types are high quality major medical insurance that provide a "Certificate of Creditable Coverage" that is important to ensure coverage for pre-existing medical conditions on the insurance plan of the next job. This is actually the most valuable feature of either type of policy.

Most people who qualify for short term medical insurance chose this option over COBRA. Less than one person in ten chooses the COBRA option due to its high cost and cumbersome administrative features that require a first payment of several months' shortly after losing your job!


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