COBRA Coverage Basics

How To Tell If COBRA Coverage Is Your Best Option.

Leaving a job often comes with a whirlwind of decisions, one of the most pressing being health insurance. If you’re wondering about COBRA Continuation Health Coverage, you’re not alone. This article covers the basics of COBRA and addresses some common questions so you can decide if COBRA is your best option going forward.

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.

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Who is entitled to Continuation Coverage?

A group health plan is obligated to offer COBRA Continuation Coverage 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.

Qualifying Events: Events that cause an individual to lose group health coverage, such as employment termination, reduction of working hours, divorce, death of the covered employee, retirement, and more.

Qualified Beneficiaries: A qualified beneficiary includes an employee, their spouse, former spouse, dependent child, or, in some cases, retirees and their families.

Benefits

  Continuity: You keep your existing doctors and coverage without disruption.

Comprehension: Employer-sponsored plans typically offer robust benefits that can be maintained by utilizing COBRA continuation coverage.

Downsides

Cost: COBRA can be expensive, since you’re now responsible for the full premium. The average annual premium for employer-sponsored family coverage in 2023 was over $22,000, which translates to significant monthly costs.

Temporary: Coverage is limited to a set period, so you’ll eventually need another health insurance plan.

  Frequently Asked Questions (FAQs):

What size company does COBRA applies to?

COBRA (the federal law) applies to all private-sector group health plans maintained by employers that had at least 20 employees on more than 50% of its typical business days in the previous calendar year.

Some states have mini-COBRA programs that may apply to smaller companies.

What if I've already hit my deductible or max out of pocket?

If you’ve met your deductible or out-of-pocket maximum before starting COBRA, you won’t have to start over, because COBRA continues your employer’s health plan.

You’ll still be responsible for other fees like copayments and coinsurance after meeting your deductible. Copayments are fixed amounts you pay for specific services, while coinsurance is a percentage of the total cost for covered services.

Once you reach your out-of-pocket maximum, your insurance will cover 100% of covered costs for the remainder of the year, but this does not include your monthly premium or out-of-network care.

What alternatives are available to COBRA Coverage?

Alternatives are:

  • Marketplace Health Plans (Affordable Care Act):The federal or state health insurance marketplaces offers individual and family plans. Premiums may be subsidized based on income, and there’s a range of plans to choose from. But as a downside, you’ll need to shop for a new plan, and benefits may differ from your employer’s plan.
  • Spouse’s Employer Plan: If your spouse has access to employer-sponsored coverage, you may qualify to join their plan due to a “life event” (losing your job). Premiums are often lower than COBRA, and the coverage may be comparable, but it’s important to keep in mind that enrollment may require coordination and documentation.
  • Medicaid: Medicaid provides low-cost or free health coverage for those who qualify based on income. It is affordable or free; comprehensive coverage, but it is limited to those who meet specific income requirements.
  • Short-Term Health Plans: Temporary plans designed to cover gaps between insurance policies. They are cheaper than COBRA, but these plans may offer limited benefits and exclude pre-existing conditions.

Considerations

COBRA can be a valuable safety net, especially if you’re in the middle of treatments or prefer to keep your current doctors.

However, it’s not the only option. Consider your health needs and budget to find the best path forward. If you’re unsure whether or not COBRA is your best option, reach out to one of our Licensed Consulting Agents for a no obligation discussion of your situation.

Still have questions? We have a glossary for Health and Insurance-related terms.

You can also book a free consultation with a Licensed Consultant to have an in-depth talk about your specific needs and questions.

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  Disclaimer

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.