Exploring Short Term Major Medical Plans as an Alternative to COBRA Benefits for Job Loss Recovery
- Ryan Goulding
- Jun 1
- 4 min read
Losing a job often brings uncertainty, especially when it comes to maintaining health insurance coverage. Many people automatically consider COBRA benefits to bridge the gap, but there is another option worth exploring: short term major medical plans. These plans can provide coverage for up to three years and may offer advantages over COBRA in terms of cost, flexibility, and coverage options. This post will explain what short term major medical plans are, how they compare to COBRA, and why they might be a better choice for some individuals facing job loss.
What Are Short Term Major Medical Plans?
Short term major medical plans are health insurance policies designed to provide temporary coverage for individuals who need insurance for a limited period. Unlike traditional health insurance plans that typically renew annually, short term plans can last anywhere from a few months up to three years, depending on the state and insurer.
These plans cover essential medical services such as doctor visits, hospital stays, emergency care, and sometimes prescription drugs. However, they often exclude coverage for pre-existing conditions and preventive care. The primary goal is to protect against unexpected, high-cost medical events during a transitional period.
Key Features of Short Term Plans
Duration: Coverage can last from 30 days up to 36 months in some states.
Cost: Monthly premiums are usually lower than traditional plans or COBRA.
Flexibility: You can often customize coverage levels and deductibles.
Application: Approval is typically faster and requires less paperwork.
Limitations: May not cover pre-existing conditions or preventive services.
How COBRA Benefits Work
COBRA (Consolidated Omnibus Budget Reconciliation Act) allows employees who lose their jobs to continue their employer-sponsored health insurance for up to 18 months, sometimes longer in special cases. This continuation coverage is identical to what the employee had while employed, including the same benefits and network providers.
Important Points About COBRA
Duration: Usually up to 18 months, with extensions possible.
Cost: The individual pays the full premium plus a 2% administrative fee, which can be expensive.
Coverage: Maintains the same benefits and provider network.
Eligibility: Only available if the employer had 20 or more employees and the employee was covered before job loss.
Why Consider Short Term Plans Instead of COBRA?
When facing job loss, many people assume COBRA is the only option to maintain health coverage. While COBRA has advantages, short term major medical plans can be a better fit in several situations.
Lower Cost
COBRA premiums can be high because you pay the entire cost of the employer’s plan. For example, if your employer paid $500 per month and you paid $100, your COBRA premium might be $600 plus fees. Short term plans often cost significantly less, sometimes half or less, depending on coverage.
Longer Coverage Period
COBRA coverage typically lasts 18 months, but short term plans can extend up to three years in some states. This longer duration can provide peace of mind if you expect a longer job search or want to avoid gaps in coverage.
Faster Enrollment and Approval
Short term plans usually have a quicker application process and fewer medical questions. This speed can be crucial if you need immediate coverage after losing your job.
Flexibility in Coverage
Short term plans allow you to choose coverage levels and deductibles that fit your budget and needs. COBRA requires you to keep the same plan, which might include benefits you don’t need or can’t afford.
No Employer Size Restrictions
COBRA only applies to employers with 20 or more employees. If you worked for a smaller company, COBRA might not be available, making short term plans a valuable alternative.
When Short Term Plans Might Not Be the Best Choice
While short term plans offer benefits, they are not for everyone. These plans often exclude coverage for pre-existing conditions and preventive care, which can be a significant drawback for some. If you have ongoing medical needs or require regular prescriptions, COBRA or other traditional insurance might be better.
Additionally, short term plans are not considered minimum essential coverage under the Affordable Care Act (ACA). This means you might face a tax penalty in some states or lose eligibility for premium subsidies if you switch back to the exchange later.
Practical Example: Choosing Between COBRA and Short Term Plans
Imagine Sarah, who lost her job and had employer-sponsored health insurance with a $600 monthly premium. She is healthy, rarely visits the doctor, and expects to find a new job within two years.
COBRA option: Pay $600 per month for 18 months, then lose coverage.
Short term plan: Pay $300 per month for up to 36 months, with coverage for emergencies but no preventive care.
Sarah chooses the short term plan because it saves her money and provides longer coverage while she searches for a new job. She understands the limitations but values the cost savings and flexibility.
How to Choose the Right Short Term Plan
When selecting a short term major medical plan, consider these factors:
Coverage duration: Confirm how long the plan can last and if renewals are allowed.
Premium and out-of-pocket costs: Compare monthly premiums, deductibles, and co-pays.
Coverage details: Check what medical services are included and excluded.
Provider network: Ensure your preferred doctors and hospitals are covered.
State regulations: Some states limit short term plan duration or require specific benefits.
Steps to Apply for a Short Term Major Medical Plan
Research providers: Look for insurers offering short term plans in your state.
Compare plans: Use online tools or speak with insurance agents to evaluate options.
Check eligibility: Review any medical questions or restrictions.
Apply online or by phone: Submit your application quickly to avoid coverage gaps.
Review policy documents: Understand your coverage and limitations before finalizing.
Summary
Short term major medical plans provide a flexible, often more affordable alternative to COBRA benefits for people who lose their jobs. They offer coverage for up to three years, faster enrollment, and customizable options that can suit those in good health or with limited medical needs. While they have limitations, such as excluding pre-existing conditions and preventive care, they can be a smart choice for many individuals seeking to maintain health coverage during a transition period.
If you recently lost your job, explore short term plans alongside COBRA to find the best fit for your budget and health needs. Taking the time to compare options can help you avoid costly gaps in coverage and protect your financial well-being during uncertain times.