If you have left or are about to leave your employer, you may have received a COBRA insurance notice. This is to let you know that you have the option of staying in your current workplace plan. You just have to pick up whatever premiums your employer’s been paying on your behalf, as well as your own.
COBRA Insurance: Understanding the Basics
You will probably also have to pay a small administrative charge on top of your new higher premium to keep that coverage in place.
It’s called “COBRA continuation coverage.”
You don’t have to take it. But if you do, you can normally stay enrolled in that plan for up to 36 months.
Does it make sense?
In a few cases, yes. But it’s not for everyone.
This blog post will give you an overview about what COBRA continuation coverage is, how it works, and whether it makes sense to take it, or whether you should choose to buy a new traditional health insurance plan, or even an alternative health sharing plan.
Let’s begin with the basics:
What is COBRA Insurance?
COBRA, or the Consolidated Omnibus Budget Reconciliation Act, is a federal law that offers a lifeline for individuals facing job loss or specific life events.
It allows you to retain your employer-provided health insurance temporarily. So you don’t have to start all over with a new deductible, and you don’t need to worry about your current medical care providers becoming out of network when you switch out of your employer’s plan
As long as you maintain your COBRA insurance, you maintain the same network of care providers that you had prior to leaving employment.}
This preserves continuity of care: A critical consideration when it comes to those who have complex and ongoing medical issues.
Compare Pricing on the Best Insurance Plans Available
How COBRA Insurance Works
COBRA insurance serves as a bridge during transitional periods, ensuring continuity in your healthcare coverage.
It comes with several essential aspects:
- Continuity in Coverage: COBRA maintains the same level of coverage you had while employed, which can be valuable if you want to keep your existing doctors and health plan benefits.
- Coverage for Dependents: Your dependents, including your spouse, former spouse, or children, can also be covered by COBRA, even if you, as the former employee, choose not to enroll.
- Avoiding Coverage Gaps: COBRA helps fill the gap for those who need health coverage between losing job-based benefits and transitioning to another health insurance plan.
- Generous Enrollment Window: You have a 60-day window to enroll in COBRA after your employer-sponsored benefits end, ensuring you won’t experience a lapse in coverage.
What Events May Trigger COBRA Insurance Eligibility?
There are many events that may trigger eligibility for COBRA continuation coverage.
These include job loss, reduced work hours to divorce, legal separation, death of a covered employee (and the necessity of maintaining coverage for surviving dependents,) or aging out of dependent status (typically at 26 years old).
However, the things that trigger COBRA eligibility are also the same kinds of life events that trigger a special enrollment period under the Affordable Care Act – including leaving your employer and losing access to your employer group health plan.
Financial Considerations
Subsidies
Unlike Affordable Care Act-qualified plans available through the online marketplaces, COBRA continuation coverage doesn’t come with a subsidy.
If you choose COBRA, you will have to pay the full premium for that plan.
Unlike when you were employed, your employer won’t provide financial assistance. This means you’ll be responsible for paying the full premium for your health insurance, including the portion your employer once covered.
In many cases, but not all, it makes more sense to decline COBRA coverage, and instead purchase a traditional health insurance plan using your Special Enrollment Period, which lasts for 60 days after the event that made you eligible for COBRA.
That way, you can receive the benefit of any subsidies you may qualify for under the Affordable Care Act.
Deductibles
If you join a new health plan, you will probably have to start from scratch with your deductibles for the year.
This can be a problem if you have already paid a lot of your deductible with your workplace plan, or you expect to consume a lot of health care over the rest of the year.
In these cases, it may make sense to take the COBRA coverage, even at a higher premium, in order to avoid having to pay a high deductible in the current year.
On the other hand, deductibles in employer group plans are usually much lower than deductibles in reasonably-priced individual and family plans traded over the Marketplaces.
Every individual and household is different.
Get Help Now
For FREE expert help in researching and identifying the specific health plans that best match your individual needs and circumstances, click here to make an appointment with a Personal Benefits Manager.
Health Sharing: A Great Option for the Unsubsidized
If you don’t expect to qualify for an Obamacare subsidy, or only a small one, and you and your household are currently in good health, you should consider health sharing.
Health sharing is a more affordable alternative to traditional health insurance.
Health sharing organizations are non-profit associations of like-minded, health-conscious individuals who agree to help share the healthcare costs of their fellow members.
These are often faith-based organizations, but not always.
Healthsharing plans don’t qualify for ACA subsidies. And they limit coverage for pre-existing conditions.
How Health Share Plans Save Money
But those who are in generally good health and who do not have significant pre-existing conditions can often benefit strongly by switching out of traditional health insurance products altogether – including COBRA – and joining a health sharing plan instead.
Here’s why:
Health sharing plans routinely cost just around half of what a traditional health insurance product costs, on a month-to-month basis, without a subsidy.
With average unsubsidized premiums for a family of four now brushing up against $24,000 per year, or nearly $2,000 per month, switching to a health sharing plan can realistically save $10,000 to $11,000 per year per family.
Especially compared to COBRA coverage, which does not qualify for any subsidies under the Affordable Care Act in any case.
Alignment with Beliefs
ACA-qualified plans are completely secular. They also have to take all comers, and cover some things that some people of faith may find objectionable.
They also have to cover things like drug addictions treatment and mental health treatment. Which drives up premiums, but does nothing to add value for those who are not at risk of needing those services.
Health sharing plans are often rooted in faith-based organizations, and some are designed specifically for members of a particular faith community.
Most are Christian, but there are options for Jewish families and others as well.
Some are also secular, with no religious components.
Your Personal Benefits Manager can help you quickly narrow down which health sharing options best align with your personal beliefs, finances, and medical circumstances.
Compare Pricing on the Best HealthShare Plans Available
Make an Informed Choice
COBRA isn’t a one-size-fits-all solution. Don’t make the mistake of taking the COBRA option just because it seems most convenient. That mistake could cost your family thousands of dollars in premiums and other out-of-pocket expenses this year.
COBRA is best suited for individuals who have already met a significant deductible and anticipate needing continued care throughout the year. For others, alternative options can offer better value and financial relief.
The choice between COBRA and alternative options hinges on your unique circumstances.
Factors like your health requirements, financial resources, and eligibility for subsidies play a pivotal role.
Seek guidance from a Personal Benefits Manager (PBM) or a qualified insurance professional to make a well-informed decision during this transitional period. Your health and financial well-being matter, and there are options available to help you navigate this journey effectively.
For Further Reading: How Much Money Can Health Sharing Save? | NetWell vs. HSA SECURE: Which Health Sharing Plan is Better for Me? | How Health Insurance Subsidies Work?
