Originally created 09/12/99

Uneasy health insurance gaps are avoidable



NEW YORK -- On any given day, tens of millions of Americans may be without health care coverage.

For many of them, however, it's only temporary. The gap may occur after college graduation when adult children are no longer covered under their parents' plans, for those between jobs or just starting new ones, or even with retirees on Medicare traveling abroad.

Although this uninsured period is usually very brief -- often lasting just a few months, at most -- it can be a dangerous time financially if a serious illness or injury should occur.

"I know a young person planning to enter graduate school who decided to forgo coverage one summer and came down with a rare nerve disorder," said Jonathan Pond, a Boston-based financial adviser. "She spent weeks in intensive care ... (and incurred) hundreds of thousands of dollars in bills.

"She lost a house that she had just inherited from her grandmother ... and faces (medical) payments for the next 20 years."

Thankfully, there are several options available to prevent financial catastrophes like that one.

The first, and the most common one, is for individuals to continue the group coverage offered by their former employers until they become eligible to participate in a new employer's plan.

Employees can purchase COBRA benefits, named for the Consolidated Omnibus Budget Reconciliation Act of 1986, but they'll have to pay the entire premium, plus administrative costs. Coverage can be continued for up to 18 months, and in some instances, up to 36 months.

Young adults who may be no longer eligible for their parents' group policy, either because of their age or because they are no longer full-time students, might be able to continue coverage under COBRA. (COBRA benefits, though, usually aren't available under college health plans.)

Another option is to purchase health insurance through a professional group or trade association.

"You can join a local chamber of commerce or state business association, which are basically in the business of offering group coverage," Mr. Pond said.

A third option is to purchase short-term health insurance, which typically provides coverage for one to six months. Such plans are often indemnity plans, which means individuals are free to choose their own doctors or hospitals.

Unlike most regular health care plans, there are usually many restrictions. For instance, many temporary plans do not cover maternity costs as well as some pre-existing health problems. Also, some states don't permit the sale of short-term policies.

Costs vary by age, state where the insured party resides, deductibles and coverage plans chosen. The higher the deductible, the lower the premium. Also, in some instances, the shorter the term, the less costly the coverage.

A 40-year-old nonsmoking man from Miami, for instance, can expect to pay a total of $391.68 for a standard three-month policy with a $250 deductible offered by Fortis Health Insurance Co. in Milwaukee (www.healthaxis.com). That same policy with a $2,500 deductible would come to a single payment of $195.84.

A 23-year-old nonsmoking woman from Los Angeles would pay $180.58 initially, then $57.02 a month for a 95-day standard policy with a $2,500 deductible, renewable for up to 185 days.

Other insurance carriers or agents can provide quick quotes easily, either over the telephone or through the Internet. Some Web sites to check: www.insure.com; www.goldenrule.com; www.quickquote.com; www.champion-ins.com.

For the traveling retiree covered by Medicare, short-term travel insurance may be sufficient. Traditional Medicare, many Medicare HMO plans and Medigap policies generally don't cover medical problems abroad. The insurance department in your state likely is able to provide a list of insurance carriers that offer temporary health insurance plans designed for international travel.