Leaving a job often comes with a whirlwind of decisions, one of the most pressing being health insurance. Whether you are entering early retired, have suffered an unexpected job loss, or are transitioning to an exciting new endeavor, you may be wondering about COBRA Continuation Health Coverage. This article covers the basics of COBRA and addresses some common questions so you can decide if COBRA is your best option going forward.
COBRA Coverage Basics
How To Tell If COBRA Coverage Is Your Best Option.
What is COBRA?
COBRA (Consolidated Omnibus Budget Reconciliation Act) is a a federal law that allows you to continue your employer-sponsored health insurance after quitting your job, for up to 18 months or longer in certain cases.
Generally you’ll be responsible for paying the full premium, including your employer’s share that they paid previously, plus up to a 2% administrative fee. COBRA coverage offers the same plan, network, and benefits as your previous employer plan, but whether it’s the right option depends on your specific situation.
Who is Entitled to Continuation Coverage?
A group health plan is obligated to offer COBRA only to qualified beneficiaries and only after a qualifying event has occurred. COBRA, as a federal law, applies to employers who had 20 or more employees in the previous year. Many states have “mini-COBRA laws that apply to companies with fewer than 20 employees. If you work for a small employer, it’s important to familiarize yourself with your state laws to understand your rights.
A qualifying event is an event that causes an individual to lose group health coverage, such as employment termination, reduction of working hours, divorce, death of the covered employee, retirement, and more.
A qualified beneficiary includes an employee, their spouse, former spouse, dependent child, or, in some cases, retirees and their families.
What Other Health Insurance Can I Buy?
If you’ve recently lost employer coverage, you should qualify for a special enrollment period to purchase ACA qualified health insurance. If you purchased through an approved marketplace, you could also get tax credits to help you pay for that coverage. Tax credits are based on
- Whether or not the COBRA is considered “affordable”.
- Your household size; all individual on your taxes.
- Your expected household income.
- The zip code where you live.
You may also qualify for Medicaid if your income has dramatically fallen, or you could enroll on a spouses employer plan.
If you are receiving unemployment benefits, this will impact your Medicaid determination and is counted as income for tax credit purposes.
There are also indemnity health insurance plans that can be purchased outside any special enrollment period. It’s important to read your contract closely, because many indemnity policies do not cover pre-existing conditions and often have lifetime limitations.
When Would COBRA Make Sense?
Because COBRA is a continuation of the exact plan you had with your employer, any progress you made towards your deductible and max out of pocket will carry forward with you if you enroll in coverage.
If you have already hit your deductible or your max out of pocket, it may make sense to continue that coverage, especially if you are expecting to have additional treatments or have prescription drugs that are covered by your plan.
If you are weighing the costs of COBRA versus individual health insurance, building a cost and risk analysis is a good idea.
Still have questions? Check out our glossary for Health and Insurance terms.
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Beyond Health employs licensed insurance producers authorized to sell life and health insurance in Utah, Idaho, Wyoming, Colorado, Montana, and South Carolina. Our activities comply with state licensing requirements and partner carrier guidelines.
Beyond Health is not a COBRA administrator, though we can recommend a partner organization to you if needed. The information here is meant for information purposes only.
Product availability and enrollment options may vary by state. For more information or questions, please contact us directly.