If you're like many other Americans, you count on your employer for health insurance coverage. But what will happen to your health insurance if you stop working or no longer qualify for benefits? Your company might begin downsizing and lay you off. You could suffer a serious injury and become disabled. Your spouse could suddenly pass away, or your marriage could end in divorce. These events can occur when you least expect them, leaving you without health benefits if you can't get, or can't afford, private individual health insurance.

Fortunately, there's COBRA.

A provision of the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) entitles employees and their dependents who have been covered under employer-sponsored health insurance plans to continue their coverage after their employment has ended or when their work hours have been reduced. In 1996, the Health Insurance Portability and Accountability Act (HIPAA) expanded on COBRA. One provision of HIPAA created medical savings accounts, experimental tax-advantaged accounts that can be used for medical expenses.

COBRA
If you and your dependents are covered by an employer-sponsored health insurance plan, COBRA entitles you to continue coverage under circumstances that would otherwise cause you to lose this benefit. As an employee, you are entitled to COBRA coverage only if your employment has been terminated or if your hours have been reduced. However, your dependents may be eligible for COBRA benefits if they are no longer entitled to employer-sponsored benefits due to divorce, death, or in certain other situations. Most larger employers are required to offer COBRA coverage.

However, you can't continue your health insurance coverage forever. You can continue your health insurance for 18 months under COBRA if your employment has been terminated or if your work hours have been reduced. If you're entitled to COBRA coverage for other qualifying reasons, you can continue your coverage for 36 months.

Keep in mind that you'll have to pay the premium yourself for COBRA coverage--your employer is not required to pay any part of it. However, if you're eligible for COBRA coverage and don't have any other health insurance, you should probably accept it. Even though you'll pay a lot more for coverage than you did as an employee, it's probably a lot less than you'll pay for individual coverage.

The Health Insurance Portability and Accountability Act of 1996
The Health Insurance Portability and Accountability Act (HIPAA) is an extensive law that is intended to be the first major step toward healthcare reform in the United States. Some of its provisions may affect you. The major provisions of HIPAA do the following:

• Allow workers to move from one employer to another without fear of losing group health insurance
• Require health insurance companies that serve small groups (2-50 employees) to accept every small employer that applies for coverage
• Increase the tax deductibility of medical insurance premiums for the self-employed
• Require health insurance plans to provide inpatient coverage for a mother and newborn infant for at least 48 hours after a normal birth or 96 hours after a cesarean section

HIPAA also created medical savings accounts (MSAs), which are tax-advantaged individual savings accounts that can be used to cover qualified medical services. Currently, the MSA program is being run on a trial basis. This experiment is scheduled to expire in 2001, at which time the federal government will decide whether or not to continue the program.

Presently, only two categories of individuals are eligible to open MSAs. If you are an employee (or the spouse of an employee) of a company that employs 50 or fewer employees, you may be eligible to open an MSA. Additionally, if you are self-employed (or married to a self-employed individual), you may be eligible to open an MSA.