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"What If You Lose Your Health Insurance," Consumer Reports, May 2006.

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by Paul Zane Pilzer
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Your child's graduation is over, you've folded away the cap and gown, and now you have a chance to mull over the big changes taking place for your daughter or son. Here's one to include: The kid's probably just lost or will soon lose health-insurance coverage as a dependent.

Getting new insurance for a young, healthy person can be challenging. But the real pain in the neck is finding affordable coverage when you're older (with preexisting conditions) and lose your job or go through a divorce after not working for many years. Health insurance is still largely tied to employment, either yours or your spouse's. When circumstances change, there goes the health plan.

Allowing a gap in coverage at any age is like playing Russian roulette, with results that can be financially devastating. A recent study found that more than a quarter of the 1,771 people surveyed who filed for personal bankruptcy cited illness or injury as the cause. A typical scenario: An employed person gets sick, can't work any longer, loses his insurance, and can't afford new or continued coverage.

Preparing for such a stormy day may not be on your radar screen yet, but it should be. Here's how to plan for a possible gap in coverage and how you might be able to close it.

2. What you can count on

Before you consider buying insurance on your own, you should check out what the law provides.

COBRA. The act allows you to continue temporary coverage at group rates through your employer's plan if you lose your job, generally up to 18 months for you and eligible dependents. But you have to pay the full premium yourself, up to 102 percent of the cost of the plan. On average, that comes to $600 or $700 a month for an individual and $1,400 for a family.

"If the company goes out of business, however, there's no COBRA," says Maura Carley, founder and president of Healthcare Navigation in Fairfield, Conn. For example, if the husband operates a business that closes at his death, his widow won't qualify to enroll in COBRA through his old plan. Similarly, if a large company files for bankruptcy and ultimately liquidates, its health plan is no longer in effect, and there's no COBRA.

HIPAA. If your coverage changes from one employer to the next, the Health Insurance Portability and Accountability Act of 1996 protects you from being denied coverage by a new employer for preexisting

3. Buy your own policy

Surprise! You can find affordable health insurance on your own. Compared with employer-sponsored coverage, "individual policies that you purchase yourself are half the price or less for the same coverage--if you're healthy," says Paul Zane Pilzer, an economist and author of "The New Health Insurance Solution: How to Get Cheaper, Better Coverage Without a Traditional Employer Plan" (Wiley, 2005).

Pilzer recommends buying your own policy while you're healthy, even if you have the option of an employer plan. That way, you would still have coverage if you were to lose your job. His research shows that the average monthly premium nationwide this year is $173 for a single healthy male age 35 and $541 for a family of four (35-year-old parents, two kids ages 5 and 8). That compares with monthly premiums of $375 for an individual and $1,166 for a family enrolled in an equivalent employer plan.

This article was also published in
Consumer Reports Money Adviser.