Guaranteed insurability better than COBRA?

MedSave Admin | April 15, 2009

Some articles like a recent post on workforce.com suggest that guaranteed continuity option in lower priced health insurance may be a better option than COBRA over the long term. We have covered the guaranteed insurability option offered by innovative UnitedHealthOne through Golden Rule Insurance in more detail in a previous blog last month. We did not fully consider the possible larger implications if this feature, also called "Continuty Option", became standard on a larger number of insurance policies.

Workforce.com says "The continuity insurance works like this: An individual with employer health insurance applies through Golden Rule for continuity coverage. The company establishes a premium based on the applicant's health status, age, location and other factors. If individuals choose to use the continuity insurance immediately, they pay an additional 5 percent for the right to put their coverage on hold should they find employer-coverage elsewhere. While they have other coverage, they then pay 10 percent of the premium for the right to turn the continuity insurance back on should they find themselves once again without employer coverage. The benefit, Golden Rule says, is that a person would not have to reapply for coverage and would therefore avoid the sharp premium increases that come with age and the development of unexpected health conditions. Laden says premiums for people in the continuity plan increase with medical inflation and are not based on a person's health. People who already have insurance can enroll in the continuity plan but defer the start of coverage. They pay 20 percent of the premium for the right to automatically receive coverage if they lose their health insurance. Laden said there is a range of premiums, but that on average the cost comes out to about $60 a month".

A spokesman for Golden Rule Insurance is quoted as saying "With the economy as difficult as it is today, there will probably be more people who move between jobs and between having insurance and not having insurance". Apparently the developers of this insurance innovation saw its potential as an alternative to COBRA. More information on COBRA alternatives can be found at www.COBRAplan.com.

The primary advantages are:

  • private individual insurance based would be less expensive than COBRA
  • more people would be eligible - eligibility is not limited by law
  • more portable and more flexible
  • no 18 month maximum benefit period - coverage available until Medicare takes over
The potential disadvantages are:

  • the cost of the insurability guarantee is generally shifted from employers to individuals
  • other insurers may be slow to adapt the guaranteed insurability provision
  • coverage may be more limited than group insurance
  • not immediately useful
  • not eligible for 2009 federal subsidy
Like any new innovation, we expect that it will take some time before we know how well this COBRA option will be utilized. For now, the Continuity option seems likely to appeal to upwardly mobile professionals who are likely to make frequent career moves, possibly including periods of self-employment or as an independent consultant.

Tags : cobra

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