Replacing benefits after a job loss

The U.S. economy has shed some 1.2 million jobs so far this year, forcing many people to cope with one of the toughest aspects of getting laid off: losing the health benefits that go along with being employed.

The cost of keeping the same health plan you had at work, under the federal COBRA law, is way up. The average family will have to pay 80 percent more than it did in 2001 to hold on to this coverage.

Buying your own policy in the so-called individual insurance market can be cheaper than COBRA, and there are many more types of health plans being sold. But these policies sometimes have coverage limits and exclusions that can be hard to decipher, and applicants with pre-existing conditions, such as diabetes or heart disease, may be turned down.

Here are your main options for staying insured if you are laid off:

Keeping employer coverage. The best choice, if it is available, is to seek coverage from a family member's employer, says Kathleen Murray, of consultant Mercer, a unit of Marsh & McLennan Cos. Even if it isn't open-enrollment season, when employees make their coverage selections for the following year, you may have the right to join a spouse's plan if you act within 30 days after you lose your workplace coverage.

You can also stick with your own employer-sponsored plan under COBRA, the 1986 Consolidated Omnibus Budget Reconciliation Act. The protection generally lasts up to 18 months, and you must opt for COBRA within 60 days of losing your job or of receiving formal notification that you are eligible for the program, whichever is later. The statute includes only companies with 20 or more employees that are continuing to offer a health plan.

If you choose to take COBRA coverage, you must keep the health plan you had before you lost your job. After you are in COBRA, you can switch plans when the company's active employees go through open enrollment.

COBRA's biggest downside is the cost. Laid-off employees are responsible for 100 percent of the cost, plus 2 percent for administrative expenses.

For an employer plan this year, the average annual family premium was $12,680, and for individuals it was $4,704, according to a survey by the Kaiser Family Foundation and the Health Research & Educational Trust.

Buying coverage on your own. Big insurers including Aetna Inc., WellPoint Inc., Cigna Corp. and UnitedHealth Group Inc. have been rolling out a greater variety of plans, letting consumers select among an expanding menu of benefits and prices.

Premiums for policies people buy on their own vary widely by state and by the age of the applicant. The average annual premium was $2,613 for an individual, and $5,799 for a family, according to the industry survey. Average costs are lower than those for employer-sponsored group plans partly because benefits in individual-insurance policies are often more limited and the plans may have higher charges.

Consumers need to check the fine print when purchasing coverage on their own to make sure they understand what the plan does and doesn't include. For instance, there might be riders blocking coverage for pre-existing conditions.

Government safety net. Consumers with modest incomes should check whether they or family members might be eligible for government coverage.

Doing without health insurance should be a last-ditch choice. Beyond the obvious risk of sickness or accident, there is a hidden cost. If you spend more than 63 days without coverage, you lose certain legal protections. For instance, a new employer can impose a waiting period before it covers your pre-existing conditions.

------ Email: anna.mathews@wsj.com.

------ The Day After -- For the newly unemployed, staying insured can be costly and confusing.

-- The price of keeping your employer's coverage through Cobra has soared in recent years.

-- Individual insurance policies offer greater variety, but can have hard-to- decipher limits and exclusions.

AP-WS-11-20-08 1147EST