Layoffs and loss of health insurance

Smart Money magazine's Lauren Young

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(CNN) -- Accounting scandals in corporate America have cost investors billions, and thousands of employees their jobs and health insurance. How can you protect yourself in this climate of layoffs? Smart Money magazine's Lauren Young joined CNN's "American Morning" with advice.

NEVILLE: Now, in the package Jeff Flock mentioned Cobra. First of all, tell us what Cobra is and if I'm fired or laid off, do I automatically continue my health insurance coverage through Cobra?

YOUNG: Cobra is the -- it's not anything to do with reptiles. It's the Consolidated Omnibus Reconciliation Act, which requires insurers to carry your coverage after you're laid off. You can get Cobra for up to 18 months and you have a 60-day period to weigh in and decide if you want to get Cobra. But the bottom line is it's kind of expensive. It's actually very expensive.

NEVILLE: Really? So how much extra does Cobra cost?

YOUNG: Well...

NEVILLE: And what does it cover?

YOUNG: Right. OK. It covers, it's your insurance. You're basically paying for your insurance to continue. So you're getting your same insurance, the same doctors, everything.

CNN NewsPass VIDEO CNN's Jeff Flock has more on a former Enron employee's tragic fight with cancer and his problems with medical coverage after being laid off. (July 25) Play video

NEVILLE: So whatever you had before, it will continue -- dental, medical...

YOUNG: Exactly.

NEVILLE: ... eyes, everything.

YOUNG: Same plan.

NEVILLE: OK.

YOUNG: Basically you're buying your plan. You're just buying a continuation of it. But it's expensive. For an individual, $225 a month if they [want] Cobra. Now, the average individual pays only $30 a month on average in all different kinds of insurance plans. For a family of four, it's $570.

NEVILLE: Gosh, that's a lot of money.

YOUNG: And for an individual, for a family of four if somebody's working and the employer is kicking in some of the money, it's only $150 a month. So that's a lot of money, a lot of money.

NEVILLE: That is a lot of money and a lot of people can't afford it. And I understand the deductibles on that are quite high, what, about $2,000 possibly?

YOUNG: That's your same deductible.

NEVILLE: So that's -- OK.

YOUNG: ... you do have an option. You can go out and buy short-term insurance and short-term only lasts for about six months. But it's not very comprehensive. Now, it is cheap. You're maybe, if you're a 40-year-old man, you're healthy, $50, $100 a month, a family, $150, $300 a month. So it's not as expensive but the deductibles can be up to $2,000 and it's not comprehensive. If you have asthma, if you're pregnant, forget about it. It's not going to work for you.

NEVILLE: So the short-term disability does not work if you're pregnant?

YOUNG: Right.

NEVILLE: Talk about long-term disability, because that's also a concern of a lot of people. How does this work? What's the process?

YOUNG: OK, now long-term disability, short-term disability, I should say, is six months.

NEVILLE: Short-term, right?

YOUNG: It's only three months usually.

NEVILLE: Three months?

YOUNG: It comes -- it's three months usually. And it pays up to 100 percent of your salary. So that's pretty good. But then you go on to long-term disability. That's 66 percent of your salary on average. That's what you typically get. And it can go on indefinitely but the way they define disability -- this is something the Supreme Court has actually bandied about -- is are you basically able to do your job? And it's a very narrow band as to whether you can do your job or not.

NEVILLE: See, but that's not fair. So suddenly here you are either laid off or fired and you're fighting to figure out what sort of insurance coverage you can get.

YOUNG: Oh, it's, certainly in the case that we just saw it's, it can be a real nightmare. And it's the last thing you want to deal with, obviously, if you're a sick person. Now, keep in mind that you can't get disability coverage if you're not employed. So it's really important to do it now. Only 40 percent of all Americans...

NEVILLE: Repeat that again. What did you say?

YOUNG: You can't get disability coverage if you're not employed, because what are they insuring you against? So go out and buy it now. It's really important. The Web is a wonderful resource. On our Web site at smartmoney.com and all over the Web, any financial Web site you can go and fill out some calculators to tell you how much insurance you need.

But it's really important. Only 40 percent of all Americans have disability insurance and it's very, very important, as we just saw in the last package.

NEVILLE: Absolutely.

Lauren, help me understand this. Now, is there a way that you can go and buy some sort of insurance in advance in the event I get laid off or I get fired?

YOUNG: You know, I'm surprised the insurance industry hasn't come up with that one yet, but we have terrorism insurance now but we don't have something like that. If you work for a union usually you, many unions will offer you something if something happens and you need to stop working. There's some kind of pool. But in general, no, there's nothing to ensure you against losing your job.

NEVILLE: Man, Lauren Young, thank you very much. A lot of important information, especially during these times.