COBRA: What you need to know: Key points you'll want to know if you're laid off and need the COBRA health insurance package.

One of the biggest shocks people get when they're laid off comes with the COBRA package -- the offer for health insurance for the next 18 months. What's stunning is the cost -- often $400 or more a month for an individual in South Florida, $1,200 and up for a family.

As part of the Obama stimulus package, the federal government is now picking up part of COBRA costs. Even so, many of the newly unemployed still find it a daunting expense. There are alternatives to COBRA, but just like discussions on healthcare reform, deciding what to do about health insurance is exceptionally complex.

What follows is a primer about COBRA and health insurance in the recession, based on the advice of a half-dozen experts.

Why is it so expensive?

Simple: Laid-off workers must pay the full cost of the health insurance they used to have, plus administrative costs that are often 2 to 15 percent. Employers' high cost of health insurance is a major reason why many companies are dumping full-time workers and getting replacements without benefits -- either through outsourcing or part-timers.

Because South Florida is notorious for high healthcare costs, COBRA charges are also higher here. A study by the consumer group Families USA found that the average monthly family COBRA premium in Florida was $1,037. That's more than the average monthly unemployment benefit of $1,013.

How does the stimulus package help?

The government is temporarily offering to pay 65 percent of the COBRA payments for up to nine months. Still, that means a family COBRA premium of $1,500 a month would still cost a steep $525.

Who should take COBRA?

The older you are and the more "preexisting conditions" you have, the more COBRA makes sense for you. If you're 50 with diabetes or high blood pressure, you probably have no alternative because buying insurance on the individual market will either be extremely high or not available.

Insurers have lists of preexisting conditions and medications. If any of those apply to you, you're likely to be subject to "automatic denial" -- or given coverage that excludes the preexisting, the very things that you're most likely to spend money on.

In some cases, employers give departing employees the choice of picking between various plans the company offers. You could move from a standard Preferred Provider Organization plan, for example, to a high-deductible. That may make sense when you need to pinch pennies, but some employers require workers to stay with the plan they had while working.

What about the rest of the family?

If the spouse and/or kids are healthy, it might make sense for the departing worker to stay on COBRA, while buying insurance on the individual market for other family members.

How do I figure out what's available in the individual market?

The choices can be numbing -- high deductible, low deductible, barebones, maximum life benefit, annual benefit, size of insurer network, health savings account. Websites such as eHealthInsurance.com provide a good chance to shop. Blue Cross Blue Shield of Florida -- bcbsfl.com -- is good at helping a customer narrow options to meet needs.

For many, the most important factor may be cost. That likely means going for a high deductible that essentially offers catastrophic coverage if you get really sick. In all cases, read the fine print. Some insurers offer high deductibles that have a small lifetime limit, meaning they wouldn't help much if you got cancer.

Don't reject COBRA until you have an alternative.

Since working your way through the individual market is so complex, you might want to sign up for COBRA until you have another deal worked out. You can drop COBRA whenever you want.

What happens when COBRA runs out?

You can still get insurance. If your employer purchased health insurance for you, state law requires you to be offered a conversion policy. If you worked for a large company that was self-insured and used an insurer as a third-party administrator, the Florida Office of Insurance Regulation says other state and federal laws guarantee you a conversion policy.

The problem: By law, conversion policies can cost up to 200 percent of a regular plan.

"Conversion policies are pretty restricted," said Sandra Foertsch of South Florida Health Insurance Services, which helps persons buy individual policies. "You may be forced into a health maintenance organization with a small network -- perhaps limited only to Miami-Dade or Broward counties, so it won't do you any good if you plan to move. And you'll generally pay more than the COBRA."

That means very expensive, but Craig Thomas of Blue Cross Blue Shield of Florida explains that "carriers lose a lot of money on conversion business," because only the oldest and sickest -- those who can't get policies on the individual market -- opt for conversion policies.

Are there alternatives to conversion policies?

Yes. Jody Finver of Coconut Grove felt like "a mouse in a maze" but through many hours of Web research and phone calls took advantage of a law requiring a "group of one" policy for the Florida self-employed that turned out to be considerably cheaper than a conversion policy.

What about just going without health insurance entirely?

How much of a gambler do you want to be with your life? If you're young and healthy, you may feel you can live forever. But having a major illness without insurance can literally be a death sentence. The American Cancer Society has studies that show women with breast cancer and no health insurance are much more likely to die than those who have coverage.

The key is this: If you have health insurance, you can keep it. State law says that if an insurer sells you an individual policy, you can't be dropped. (There are exceptions, including persons moving out of state.) If you have no insurance and then try to buy it when a major illness strikes, you're out of luck.