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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Low cost alternatives to COBRA coverage

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: I am currently on COBRA after being laid off from my job several months ago and it is extremely expensive. I also keep getting turned down for individual coverage because I take one certain type of medication. I need an affordable individual plan until I can get employed again with a firm that has a group plan. I also need an alternative to state coverage if I ever want to freelance or be self-employed. I can't seem to win with any insurers I contact here who just tell me to stay with COBRA, which will eventually expire. Any suggestions?

A: Your dilemma is the most common situation facing individuals who purchase their own health insurance. The question is do I purchase full coverage insurance that is costs about the same as my mortgage or rent, or do I purchase a less expensive coverage that leaves me with significant out-of-pocket expenses and an uncovered risk? From a financial and mathematical perspective, the second option is almost always the better approach, yet almost no one in the insurance or benefits field would be comfortable recommending this approach. This explains lack of guidance with your problem. On a nationwide scale, COBRA coverage is the best approach for less than 3% of those leaving a job, so the odds are strong that a better approach is available. A low cost health insurance that provides coverage for everything except your pre-existing medical condition is probably the best approach. In your case, the situation is now more complicated because you have been declined for other health insurance. The previous declines keep you from qualifying for some lower cost health plans that would have issued coverage by excluding the pre-existing medical condition. A professional adviser would have been able to avoid those declines, but it is too late for that now. You need to focus on a health insurance that allows applicants that have been previously declined. A short-term medical insurance plan is most appropriate if you expect to be covered by a group health plan in the future. Check the complete listings at One possibility is the "Secure STM" or "Celtic STM" that does not ask about previous declines. Other policies like "Simple STM" only restricts applicants who have been declined in the past 12 months. Also consider the Basic Health Insurance plan that accepts all applicants under age 70 but only provided limited coverage. Check to see whether any of these plans are available in your state. Also, it appears important in this case to recognize that your total medical expenses are your largest (or at least one of your largest) financial concerns and then build your financial plans around that priority rather than trying to squeeze health care costs in as a “last minute” budgetary item. In the big picture, you will find that this issue is manageable if you integrate your health plan financing with your overall financial planning strategies and utilize solid professional advice to avoid the pitfalls. See the article “Short Term Medical Insurance for Special Situations” at for more information on this topic.


More resources:

Short Term Medical Insurance for Special Situations