Gap Health Insurance – What You Need to Know

gap health insurance

Health insurance is a necessity for all Americans. And many working-age individuals get their health coverage via group health insurance plans through their employer. Usually, these plans cover the employee, and family members can be added to them.

But employment status can change. Layoffs and downsizing can occur in any economic environment. And since the COVID-19 pandemic, millions of Americans find themselves seeking new employment every month, because their employer reduced their hours or closed completely.

The notion that your family might lose health insurance for many months can be terrifying, especially for families that rely on frequent medical care and expensive prescriptions. That’s when gap health insurance plans become valuable.

Gap health insurance exists to provide coverage for people who are in-between jobs, or in-between policies. You might also be interested in “COBRA,” the Consolidated Omnibus Budget Reconciliation Act.

This article is an unbiased look at gap health insurance options and short term health insurance, and the risks of a gap in health insurance coverage. (Do not confuse this with “gap coverage for high level deductible health insurance policies,” that’s a different sort of insurance.)

Learn About Gap Health Insurance Coverage

This unbiased post will cover:

Why Health Insurance is Crucial to Americans

According to the American Hospital Association (AHA), roughly 90% of US residents have health insurance today. Those numbers have been improving over the last five years.

Per AHA, access to health insurance has many benefits, like:

  • Improving access to quality medical care
  • Better outcomes for insured individuals
  • A tendency to seek more frequent healthcare during times of need
  • A tendency to take advantage of preventative care, like vaccines
  • And reduced financial strain on individuals, families, and communities

We will start with that last point. The financial strain of surprise medical costs for uninsured people can be staggering. That’s because medical care providers (doctors, hospitals, and so on) have separate price lists for insured and uninsured individuals.

Comparing Costs of Insured and Uninsured Americans After Emergency Medical Care

Let’s imagine that you and your best friend both got laid off from the same factory. You both break an ankle while waterskiing, on the same day. You have gap health insurance, but your friend does not.

We’ll imagine you have identical injuries and head to the same emergency room for care.

You will both require:

  • Triage, when hospital staff decides whose injuries are most dangerous or life-threatening
  • Paperwork and interviews about the injuries
  • X-rays
  • A visit with a doctor who recommends surgery based on your X-rays
  • Surgery in the operating room (OR)
  • Anesthesia
  • Medications and prescriptions to fill
  • Medical devices, like crutches and supportive boots

As your emergency room visit ends, the doctor suggests you both get some physical therapy (PT.)

Healthcare Providers Charge Higher Prices to the Uninsured

A few weeks pass, and your medical bills start arriving in the mail. Now, every insurer and every medical care provider have different plans for prices.

Uninsured people pay higher prices for the same services. Beyond that, “preferred providers” have a contract with an insurer to offer much lower costs than those paid by uninsured individuals, or even those with less-popular insurance plans.

Check out the table below for an idea of how this might work out in real life. (We based these prices on national averages for healthcare costs, and average insurance payments nationwide.)

ServiceYour Cost / “Preferred Provider” Insurer PaysYour Friend’s Cost
Triage$25 / $25$100
X-rays$200 / $200$1,800
Surgery$1,000 / $1,200$5,000
Anesthesia$50 / $100$800
Prescriptions$25 each / $100 each$300 each
Medical devices$25 / $100$600
Totals$1,325 / $1,625$8,600


Ultimately, your friend pays $8,600 for that broken ankle. Meanwhile, you pay $1,325, and your insurer pays $1,625, for a total of $2,950. All to the same hospital for identical services!

And the same goes for ongoing physical therapy. You might pay a small deductible ranging from $25 to $60, while your friend pays $200 per visit for the same treatment.

Medical care in the US is expensive, that’s why Americans need insurance. And, politics aside, that is one of several reasons why President Obama signed the Affordable Care Act (ACA, or “Obamacare”) in 2010. It was an effort to make health insurance more affordable and more transparent for consumers.

Now, if you are the breadwinner in your household who was recently laid off, or if you already understand the cost implications of health insurance because you have a medical condition that needs regular treatment, you may know all this. And that’s why you are interested in buying gap health insurance, or COBRA.

What is COBRA?

Per the US Department of Labor (DOL), COBRA aims to give “workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction [of] hours worked, transition between jobs, death, divorce, and other life events.”

You could get COBRA coverage if the employer sponsored group health plans for 20 employees or more in the prior year. But if you worked for a smaller business with only a handful of employees, COBRA is not an option.

Also, you must have quit or been fired, but not for gross misconduct (like sexual harassment), or had your hours reduced to the point that you no longer qualify for health insurance through your employer.

Furthermore, COBRA can be extremely expensive. That’s because your employer might have been paying high premiums for group health insurance, and COBRA will extend that same coverage.

This issue is common because employers write off their spending on sponsored plans. If a major company is looking to mitigate their income taxes and retain top talent, an outstanding — and expensive — group plan is a worthwhile investment.

Whether you have discovered COBRA costs are too high, or that you are ineligible because you worked for a small company, gap health insurance is a good option.

Situations That May Lead One to Shop for Gap Health Insurance Policies

Discovering that you do not qualify for COBRA, or that you cannot afford it, are the most common reasons people shop for gap health insurance plans. You might not think this could happen to you, but let’s illustrate how it does occur with a story.

The Story of Eddie and Ella

Imagine a mature couple, Eddie and Ella.

Eddie is 67 and still working every day. He is almost ready to retire from Lockheed Martin, where he’s worked for 40 years as an aerospace expert. LM provides outstanding health insurance coverage, he has the absolute best insurance, a Platinum Plan. Eddie chose this plan because they’re older, and his wife has several health issues, including diabetes. She needs regular care and expensive prescriptions.

Ella just turned 64, and she has been a dedicated homemaker for the past 50 years. In nine months, she will qualify for Medicare enrollment, but right now she needs her husband’s Platinum Plan. It’s the only way she can afford her insulin and other medications.

Unfortunately, Eddie passes away of a heart attack. Ella qualifies for COBRA but discovers it will cost $2,000 per month. Ella is unsure how her finances will work out over the next few months. As a widow, she can start receiving Eddie’s Social Security retirement payments, and she has considerable savings. But $2,000 is a huge bill to pay for the next nine months, she will end up paying $18,000 for health insurance!

Ella decides to shop around for gap health insurance online.

Let us explore that process.

How to Shop for Gap Health Insurance Plans Online or In-Person

As a consumer, you should do a little homework before shopping for gap health insurance policies. Here is a list of helpful points to know:

  • A list of everyone to be covered by your plan, including their date of birth, correctly spelled legal name and Social Security number
  • The exact date you and your family need coverage
  • The type of plan you had through your employer (Bronze, Silver, Gold, etc.)
  • Your physician’s name and address
  • A list of any health concerns you have, or that your family members have
  • A list of prescriptions you take regularly
  • A paystub, so you know what you were paying for health insurance

Now, talk to your favorite health insurance agent or go online to start shopping.

Shopping for Gap Health Insurance Online: How to Search

As of November 2022, an internet search for “gap health insurance” returns 250,000,000 results. Now, some of these results deal with supplemental gap health insurance, and that’s a different product. Some results will not apply to your state or location. So, rather than wade through a bunch of useless ads, try searching for more specific terms.

You could try:

  • Gap health insurance in [your state]
  • Gap health insurance for the unemployed
  • Gap health insurance policies in [your city]
  • Temporary health insurance plans for unemployed

Be cautious about sharing your personal information online when applying for insurance. Scams are everywhere on the internet! Also, be sure to do this research from a safe, secure internet connection. It’s okay to browse, but do not share any personal information when you are surfing the internet on a free network, like those available at Starbucks or McDonalds.

How to Tell if an Insurance Website is Legitimate

Scammers, spammers and identity thieves are everywhere these days. Sometimes, it can be challenging to discern between a legitimate insurance agent online and a scammer looking to steal your identity. Here are some points to keep in mind:

  • The website should display a “secure” icon, it may look like a padlock in the upper left corner of the address bar
  • The English, spelling and grammar will be correct
  • The website links to reliable sources that end in .gov or .edu
  • All the links throughout the site work, they rarely take you to an empty page or “404” message

You can also do a “Whois” search at Just enter the domain name of a website — like ours, — and click the “whois” button. You will discover who owns a website. If an insurance sales website comes back as private, this is a red flag. Insurance companies go to great lengths to display their name, address and license, and no reputable insurer would hide this information from potential clients.

But scams abound in “real life,” too. So check out the licensing status of any organization before you sign papers. It’s easy. Every state has an insurance commissioner, and you can check their license status on their website.

Is a Gap Health Insurance Plan Always Better than COBRA?

We promised you an unbiased article, and here is the truth. Gap health insurance policies are usually cheaperthan COBRA, but they may not be better for everyone. COBRA extends the same coverage you had from your employer. That means issues like mental health and maternity care will be covered the same way.

A gap health policy might not provide the same coverage. If, for instance, you lose your great health insurance while expecting a new baby any day, the COBRA policy might give you peace of mind and save you a ton of money on the birth of your baby.

And if we think back to our story about Ella and her diabetes medication, she might discover her medications cost quite a lot through a gap health insurance plan. She needs to crunch some numbers to decide which coverage is the better deal until she can get Medicare coverage.

But as a rule, for young, healthy, single individuals and families, gap health insurance may save you thousands of dollars compared to COBRA. And that’s money you need on hand while you seek a new job.


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