Periods of transition can occur when you least expect them. Your company might go through a period of downsizing that results in your layoff. You could suffer a serious injury and become disabled. Your spouse could suddenly pass away, or your marriage could end in divorce. Fortunately, there are several options for continuing health insurance coverage that may be available to you during these transition periods.
In 1986, the federal government passed COBRA, a law that provides for (among other things) continued access to health insurance for people who lose their coverage due to termination of employment or a reduction in work hours, or certain other triggering events. In addition, state law may contain additional provisions.
In 1996, the Health Insurance Portability and Accountability Act (HIPAA) expanded on COBRA and made it easier to continue health-care coverage during transition periods.
In 2003, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 created the health savings account (HSA), a tax-advantaged vehicle that permits individuals to save money that can be used to pay medical insurance policy premiums and certain uncovered medical expenses. These savings can help you weather transition periods.