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COBRA and Bankruptcy

Posted on: September 30th, 2012 by Kristen Marie

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It’s an all too common situation, a company or business files for bankruptcy or closes it doors and suddenly employees are scrambling to figure out what to do about health insurance. Naturally COBRA insurance surfaces as a possible insurance option, but unfortunately COBRA isn’t an option when a company goes bankrupt. Since COBRA is a continuation insurance, there must be a policy to continue. When a company goes bankrupt, their insurance policy is cancelled as well which eliminates COBRA as a potential insurer. So what can you do?

First things first, you need to find another health insurance plan and quickly. Not going without health insurance is dangerous, not only because you may need medical care and it will be extremely expensive but also because going without health insurance makes it harder to get health insurance in the future, especially if you have a preexisting condition. Under the HIPAA law insurance companies can not deny you for a preexisting condition as long as you have continuously held insurance and not experienced a lapse in coverage of over 60 days. This is extremely important to pay attention to because you never can predict medical needs or a condition arising and not having continuous coverage can make this more difficult for ever.

So what options do you have? Well luckily there are lots of alternatives to COBRA and many are actually much less expensive. The option that is best for you will depend on your current health status, age, income, and how you like to use your health insurance.

For people who have preexisting conditions and major medical needs there are likely two insurance options you should consider. The first is a private individual or family plan that will offer similar coverage to what you had before the company went bankrupt. Additionally you should look into preexisting condition insurance (PCIP plans) which offer insurance to people with preexisting conditions. You could also look at state high risk pools.

For people who are generally healthy, there are lots of options for insurance and it depends on your needs. For a full service plan you will want to look at an individual or family plan that mirrors a typical employer plan. However if you do not use your insurance as much and want a cheaper option, then you can look into high deductible and short term plans.

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