Terrie and Layne Los paid more than $11,000 in health insurance premiums to cover their family of four for seven months.

It took only an 8-cent shortfall in their payments to lose their plan.

The family finally got its health plan reinstated after two weeks of appeals to everyone from insurance officials to medical societies.

But the ordeal illustrates the unforgiving nature of a federal program set up, in part, to protect the health insurance of laid off workers: the Consolidated Omnibus Budget Reconciliation Act, or COBRA.

As scores of newly unemployed workers consider COBRA for the first time- and a 65 percent federal subsidy takes effect to help pay for it- experts say the lesson here is to pay unusually close attention to the terms and requirements of the program.

Dealing with COBRA is "not as simple as calling up your credit card company," said Paul Fronstin, director of the health research program at The Employee Benefit Research Institute, a nonprofit firm that studies issues related to employee benefits.

In most businesses, a customer service representative might give a consumer a break for an obvious oversight or logical mistake.

Not with COBRA.

"The rules are pretty clear about what's allowed," Fronstin said.

Terrie Los, a Colorado Springs biologist, found that out the hard way. Los lost her job at a local research firm in late August. Her family depended on her for health insurance, because her husband is a small-business owner unable to provide an affordable group plan. They enrolled in COBRA to keep their group plan, offered by Humana and administered by a third-party firm, Ceridian Corp.

Under COBRA, eligible former workers can keep their health insurance if they are willing to pick up the full costs of the premiums and pay administrative costs. That's not cheap, since employers usually pick up 75 to 85 percent of employees' premiums.

The Loses' monthly premiums rose from about $900 to $1,577.08. Despite the cost, the couple was relieved to have coverage for themselves and their two teenage daughters. The family has no major health issues, although they do have a few monthly prescriptions. But both Terrie and her husband, a pharmaceutical consultant, knew from their careers in the health care industry that in a moment a medical diagnosis could change everything. One study found health care expenditures were among the reasons for 50 percent of bankruptcies.

Six months into their COBRA coverage, Layne Los unwittingly overlooked 8 cents on their bill, paying $1,577 rather than $1,577.08. A statement was mailed to them the next month from Ceridian that noted the outstanding balance, but the Loses and Humana say it was unclear. The Loses submitted a check for $1,577.08, thinking that took care of the problem. In fact, they owed $1,577.16.
On March 31 they received notice from Ceridian that they were canceled.

Terrie Los contacted Ceridian Corp., a firm that provides business services and acts as a third-party COBRA administrator between employers and health insurers. It is one of the largest administrators of COBRA claims. Los was told one cent or one day late is all it takes.

Stephanie Brown, a spokeswoman for Ceridian, said the company is getting many calls from consumers and reporters over similar disputes, but she said the company is bound by the rules. "We don't step outside the boundaries because there are repercussions."

Humana, when it learned of the situation, bypassed Ceridian to restore the family's coverage, said Humana Colorado President Dan Oftedahl.

"Basically it will be like the system never really kicked her out," he said.

Human uses several companies to handle COBRA clients, and even though COBRA rules are stringent, not all administrators are as uncompromising as Ceridian, he said.

Chicago attorney Andy Anderson, who specializes in health insurance issues and is a COBRA expert, said his general advice to people enrolling in the program is "always pay your bills in full and pay them as early as you can." If you don't, and you try to fight, "you're likely to come out on the wrong end of that."

He said insurers and employers don't necessarily want COBRA clients' business. They are being forced by federal law to insure people, and most of the time it means a loss. For every dollar a COBRA customer pays, he said, on average the insurance company pays out $1.40 in medical expenses.

People who are willing to pay such high premiums under COBRA, Anderson said, often do so because they've determined the medical expenses outweigh what they pay in premiums, or they have existing health conditions that would prevent them from finding insurance elsewhere.

Just how many stories like the Loses are out there is unclear. Enrollment in COBRA is loosely tracked, experts say. Most people leave COBRA through nonpayment, Anderson said, but that's typically because they stop paying on purpose, either because they've found other coverage or can't afford the premiums anymore. Rarely is it over a few cents.

Experts and insurance officials agree that there are at least a few who fall victim to mistakes that in most circumstances could be easily resolved. One couple in Miami was canceled by Ceridian over 4 cents, according to the NBC news affiliate there. Their insurance was reinstated following media inquiries into the situation. Some COBRA administrators don't send out bills, so people who were waiting to receive one before mailing a check were instead canceled.

Brown, at Ceridian, confirmed that nonpayment cases sometimes stem from a few cents or a forgotten payment. The company investigates such situations for its own errors, but it doesn't not address those made by consumers.

Top officials at the Colorado Division of Insurance echoed Anderson's advice to never take chances and pay close attention to every detail and rule. The division does not oversee COBRA, which is managed by the U.S. Department of Labor, but it is well-acquainted with its potential pitfalls.

"Don't overlook any kind of communication you receive," said Commissioner Marcy Morrison. "Read these letters or these statements very, very carefully. And that's true for all insurance."

A FEW THINGS TO KNOW ABOUT COBRA

• COBRA is a 23-year-old federal law that allows terminated employees to keep their health insurance if they are willing to pay 100 percent of the premiums and an extra 2 percent to cover administrative costs.

• The American Recovery and Reinvestment Act provides a 65 percent subsidy for for eligible workers or dependents between Sept. 1, 2008, and Dec. 31, 2009. It allows people who either did not sign up originally or who later dropped COBRA through Feb. 16 to sign up again. Employers have until April 18 to notify former employees and their dependents of eligibility.

• COBRA may not be the best option for everyone. Going to a spouse’s health plan is usually the best option, if possible. Some people may qualify for Medicaid or Medicare, and people in good health might be able to find individual coverage. For information on COBRA from the Dept. of Labor, visit http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.HTML