As the layoffs pile up in today's tough economy, unemployed workers are increasingly turning to short-term health insurance for affordable, flexible coverage in a time of transition.

Several companies are offering insurance plans ranging in coverage from 30 days to 12 months as an alternative to the federally mandated COBRA. While the Consolidated Omnibus Budget Reconciliation Act allows an individual to continue getting group coverage for up to 18 months after leaving a job, the premiums can be expensive.

Short-term health insurance plans are a viable option for someone in between jobs. The plans offer a range of deductibles, a choice of physicians and prescription drug coverage.

But people should be aware of some pitfalls. Signing up for temporary health insurance could ruin an individual's chance to get a permanent plan, especially for people with pre-existing health problems.

High unemployment, higher sales: CPIC Life Insurance Co., a subsidiary of Blue Shield of California, reports that revenue growth for its two short-term products shot up 30 percent between 2000 and 2001. Lou Lombardo, director of ancillary product sales for Blue Shield/CPIC Life, said the short-term products were introduced in the 1980s, but have gained dramatic ground only recently because of changes in the attitudes of the work force and the economy.

Layoffs during the past year have led the nation to an 18-year high in the number of jobless people -- 3.65 million, according to the U.S. Department of Labor. In California alone, the unemployment rate rose to 5.4 percent in October 2001 and the state witnessed the biggest one-month gain in more than 21 years.

About 20 million Americans buy their own health insurance, but these are the lucky ones. About 45 million Americans, or 20 percent of the U.S. population, have no health insurance at all. With company layoffs on the rise and more businesses calling it quits, more Americans may soon join the ranks of the uninsured.

Most people out of a job are only aware of COBRA. The federal law allows workers to pay for their own health coverage through their previous employer's plan for 18 months after they leave a job, take a leave, or lose their medical benefits after their work hours get cut.

But short-term, or temporary, plans are being touted as alternatives to COBRA. Lombardo said the policies are attractive not only to recently laid-off workers, but those recently hired, students and workers making career changes. In many cases, employers offer it to new employees who are waiting for underwriting on a permanent plan, which can take four to six weeks.

"I think the working population is in transition with all the economic challenges these days," Lombardo said. "More people are on the move in general. We're finding more of an entrepreneurial spirit. People are willing to work for smaller employers, and the adult population is going back to school. They're more flexible with their employment, and their benefits need to be more flexible. This is an excellent product for people unsure of their benefit needs."

Joe Hart, an agent for Parisi Insurance Inc. in Carmichael, said he's seen an increase in people looking for coverage after losing group coverage because of layoffs, relocations or changing jobs. Unemployment is one of the major reasons for the hike in customers looking for coverage.

The case for COBRA: Hart offers both of CPIC Life's short-term products. However, he's not seeing a particular trend toward short-term coverage among his customers.

"I usually recommend they take their COBRA while we wait for an individual plan to take over," Hart said. He explained that if an individual opts out of COBRA and signs up for a short-term policy, the temporary plan is considered individual insurance, not group. That distinction eliminates their eligibility for coverage under the Health Insurance Portability and Accountability Act.

"HIPAA coverage can be expensive, but it is permanent coverage that can be in place until Medicare kicks in," Hart said. "For people with health problems, this is especially important to have available."

State insurance officials also warn of discontinuing COBRA. If unemployed workers have pre-existing health conditions, they can't get insurance in the marketplace unless they have COBRA. Once their COBRA rights expire, they may lose eligibility for any individual health insurance.

Hart recommends CPIC Life's short-term product for people who haven't had coverage for an extended period of time, or have never had coverage, for example, young people just getting off their parents' insurance plan. Many college students who are just graduating but haven't landed their first job use the temporary plans.

Dollars and cents: He said CPIC Life's premiums are competitive. For Sacramento-area residents in their 20s, premiums can be as little as $52 a month, with a $2,000 deductible, or $102 month for a $250 deductible. For people in their 40s, the premiums are $94 and $184, respectively.

"It's a reasonable plan, but keep in mind these are single rates," Hart cautioned.

COBRA charges only 2 percent more than the group rates on the previous employer's plan, Hart explained. Because many short-term plans are age-rated, COBRA may be cheaper in some cases.

"Where people get surprised on COBRA is when they forget the employer's contribution," he noted. "They forget that their employer has been paying a portion. That's why it's sticker shock when they get that first bill."

A major benefit of CPIC Life's short-term product is that it supplies immediate coverage, usually within 24 hours of applying.

"If you apply today, you are covered at 12:01 a.m. tomorrow," Lombardo pointed out. "That gives peace of mind."

Employers view short-term plans as an option for employees, either when they are forced to lay off workers or they are hiring and waiting for a permanent plan to kick in.

"In an economic downturn, it's depressing to lay off employees," Lombardo said. "Employers want to do something for them, so they might offer 60 or 90 days of coverage using one of these products."

CPIC Life offers a six-month plan, which is more expensive, and a plan for coverage up to 12 months. Lombardo said the plans are low-maintenance, with customers merely paying premiums on a monthly basis to stay covered. The plans are PPOs, preferred provider organizations, which means they are based on indemnity, allowing members to choose their doctors.

Lombardo said these temporary plans work as both long- or short-term solutions for healthcare coverage.

"This can be a competitive product, if you're not real definite about plans and you need coverage," he said.