Unfortunately, if a company goes out of business and there is no longer a health plan, COBRA coverage is not available to former employees. COBRA also becomes unavailable if an employer stays in business but stops offering health insurance.

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COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, a landmark federal law written to provide workers a safety net for when they resign from jobs or are terminated and lose their group health insurance coverage. The law applies to employers with at least 20 employees, but many states have adopted "mini COBRA" laws, which apply to employers with fewer than 20 workers.

Under the federal COBRA law, a worker can continue to receive health insurance coverage through a former employer's group health plan for up to 18 months after leaving a job. Spouses and dependent children can also receive coverage, in some cases as long as three years. To receive benefits from COBRA, the former employee must pay the full cost of the premium; the employer no longer contributes.

Health insurance when your company disappears

If your employer goes out of business, consider other health insurance options, such as coverage through a spouse's employer-based group health plan or through another employer when you find a new job. You can also apply for individual health insurance. Get insurance quotes, and compare plans to find one that provides the benefits and health care provider network you need.

Establishing health insurance coverage protects you both now and later, when you find a new job and are eligible for another group health plan. Under the federal Health Insurance Portability and Accountability Act, a new employer-based group health plan cannot exclude coverage for pre-existing conditions as long as you have maintained health insurance for the last year, with no gaps of 63 days or more.

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