[Al Skierkiewicz]

Madison,
Before you make any decisions get all the facts from your employer. A one month severance for your length of service is pretty good, many are based on one week for every full year of service. The 18 months of medical is called "Cobra" and it reguired by law when the employer is of a certain size. It is expensive even for a young healthy person, so check on the cost. If you have any conditions that require care, and have already been accepted under your current plan, it might be wise to stay with it. You might be able to find a policy through an insurance broker that is way cheaper and has the same coverage.
Layoffs are a way of life these days. I know that it doesn't make you feel better when it happens but you need to psyche yourself up and get back to work. Taking the contractor position may lead back to full time employment but the odds are against it. My advice has always been to keep a paying position so you can put food on the table while you look for something better. In most cases, an employer who lays off employees and goes to a contractor workforce is either in big trouble or has moved to a distinctly anti employee mindset. (also becoming more common. Interject political view of current administration here...)
However, if a job comes along take it. Employers generally do not hire new employees around the holidays unless they are desperate or need temps to get over the holiday rush. I would get to work and start sending out resumes.