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How to Choose Between an HMO and PPO Health Plan When Your COBRA Health Insurance Coverage Expires

When you get the surprise of a sudden change in employment status and become unemployed, keeping your health coverage can be a challenge. Designed to be a protection for those who face this situation, COBRA was created by the federal government. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1986; this allows employees displaced by termination, lay offs and voluntary resignation the opportunity to continue their health insurance for up to 18 months following the employment change in status.

You can qualify for COBRA health insurance coverage in cases where the employer you no longer work for had a group plan with a minimum of 20 employees enrolled into it and you were a member of that plan for at least six months. If any other members of your family were also enrolled under the same plan, they are also able to get COBRA- even in the case that you choose to not get it yourself. The nature of your ‘qualifying event’ can mean that you can get COBRA benefits for up to 36 months.

The cost associated with COBRA continuation of coverage benefits is high. You will be responsible for 102% of the cost of the insurance, which can eat up almost all of your unemployment amount. This cost includes administrative fees which make it so expensive. There options to help you afford this cost; you can get assistance under the American Recovery and Reinvestment Act of 2009. This program will allow you to recover up to 65% of the premiums, but only for a period of nine months.

If your COBRA subsidy is about to run out, you can consider getting an individual health insurance policy for yourself and other family members as a way to make COBRA coverage more affordable. When selecting a private policy, you can choose between an HMO and PPO health plan. HMO and PPO are common health insurance terms for the main types of managed health-care systems. A Health Maintenance Organization (HMO) plan requires you to get all your health care service from providers who are members of the HMO network. Under an HMO plan, you will need to select a primary care physician who will be your main health services provider and will refer you to other specialists in the HMO network as needed. A Preferred Provider Organization (PPO) on the other hand, does not require you to get your care from health providers within the PPO network, but will penalize you if you choose to go outside the PPO network by paying for their services at a lower rate or not paying for them at all.

So what are the pros and cons of getting HMO vs PPO insurance? While both can be affordable, you should get an HMO if you care more about preventive care services and you don’t have a preferred doctor. On the other hand, a PPO might be the better choice if the doctor you’re already seeing is a member of the PPO network or you want some freedom to direct your health care since you can see any specialist you want as long as they are a member of the network.