You might have heard your coworkers talk about it, or thought about getting it when you became unemployed. Whatever the case, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) was established to give temporary healthcare to people out of work.
It allows the newly unemployed and their dependents to continue using their previous employer’s group health insurance for a short period of time. If you work at a company of 20 or more employees, your employer is required to notify you about COBRA.
Who Qualifies for COBRA?
Signed into law in 1985, COBRA coverage is a way to ensure that people who recently went unemployed would still have access to their current health insurance. However, access to your previous group health plan is limited.
The amount of time you may stay on your plan depends on your reason for leaving your job, and whether you have dependents on your policy.
“COBRA allows employees to continue their healthcare coverage after experiencing a qualifying event that makes them no longer eligible to receive coverage," explains Sal Raichbach, Chief of Clinical Compliance at Ambrosia Treatment Center. What's a qualifying life event? This would include:
- A loss of employment for reasons other than being terminated for cause
- A reduction in the amount of hours you work which prevents you from receiving benefits
In the case of these events, you may use COBRA for up to 18 months.
In addition to the qualifying events above, other incidents that would allow a former employee’s spouse or dependents to qualify for COBRA are:
- If a covered employee can receive Medicare
- Legal separation or divorce
- An employee passing away and having dependents on their health plan
In this case, they will get coverage under COBRA for up to 36 months.
Because this coverage is temporary, you should consider your next step after COBRA runs out. Let QuoteWizard help you compare health insurance plans post- COBRA.
There is one caveat. If the company you work for goes out of business, you most likely will not be eligible for COBRA.
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How Much It Costs
COBRA provides health coverage to workers and their families after they leave their place of employment. However, you will pay much more maintaining the coverage for a few months longer, than you would if you were still on your employer’s plan.
Getting group health insurance through your employer usually means that they will pay all or a large portion of your monthly premiums. If you get COBRA, you will be on your own for paying your premiums. You will often also have to pay a 2 percent administrative fee.
"COBRA is very expensive since the employer contribution is essentially removed and the individual pays for the entire plan themselves,” said Meghan Nechrebecki, Founder and CEO of Health Care Transformation. “I highly recommend checking out other options on the health insurance exchange since you have experienced a qualifying event and may be eligible for tax subsidies based on income."
The nice thing about COBRA is that it’s the same plan and coverage you were familiar with and already using. The downside is that you have to pay for the premiums now.
With COBRA, you stick with the same health insurance plan, meaning you stick with the same primary care providers, same hospital, and same prescription drug coverage. You don’t have to search around, trying to find a new doctor and health care facilities.
You will have the same costs of co-payments, deductibles, and co-insurance, as you had with your previous employer.
You will also be able to make changes to your plan during the annual open enrollment period, just like if you were still with the previous employer. It’s worth noting that if your previous employer makes changes to the group healthcare plan, your COBRA plan will change as well.
How Do You Enroll?
Unlike many other types of health insurance, COBRA doesn’t have an annual enrollment (election) period. However, there is still a specific time period during which you can elect coverage, and it lasts for a limited time.
Your COBRA enrollment period starts the day you become unemployed due to a qualified event, or become a part time worker. You will receive a notice about COBRA in the mail after you end your job.
From there you have 60 days from receiving the letter in the mail explaining how to elect coverage. Your election period may also start 60 days from the qualifying event that caused you to lose coverage. Even if you don’t elect coverage, your children or spouse may.
If your qualifying event is something like a divorce, you must notify your employers’ benefits department within 60 days. From there they will provide you with information on how to elect coverage.
If you miss this election period, your group health coverage will end.
Time Period of COBRA Plan - How Long It Lasts
Depending on the qualifying event causing you to leave your job, the duration of time you can hold onto your policy will vary. As listed above, you may receive either 18 or 36 months of COBRA coverage, depending on how and why you left your job.
An exception is if you are disabled during the first 60 days of your coverage. If this is the case, you may get another 11 months of coverage after your COBRA policy ends.
COBRA will eventually come to an end, and in this case you might need help finding a new health plan. Fill out our quote request form to get your best deal on your next health insurance plan.
Can You Lose Your Coverage?
Unfortunately, there are always reasons why you can lose insurance coverage. For COBRA, if you don’t pay your monthly premium, your coverage may be terminated.
You want to make sure to stay current on your premium payments, because if your COBRA coverage gets dropped, you have to wait until the next healthcare open enrolment period, before you can get a new plan.
Your coverage can also end if your previous employer ends their group health insurance plan altogether. If they go out of business, or just cancel their health plan, your COBRA plan may end as well.
While there are many pros to COBRA coverage, there are also many negative aspects. For one thing, COBRA premiums can be high. You will be paying much more than you did when you were on your employer’s plan. There are also no subsidies available with a COBRA plan.
There are however subsidies available if you purchase an Obamacare plan.
COBRA vs. Obamacare: Which is Better?
COBRA coverage was established long before Obama initiated the Patient Protection and Affordable Care Act (PPACA) or Obamacare, into the mix.
People would spend huge sums of money on COBRA premiums, because there was often no government program that could help.
Obamacare is a much more affordable option compared to COBRA. Obamacare metal plans split the cost of coverage between you and your healthcare provider, and you may qualify for cost sharing subsidies or tax credits.
You can purchase Obamacare through your states healthcare exchange during the different annual enrollment periods. This is the primary time to purchase or make changes to your health plan.
There are many plans to choose from for much cheaper premiums than COBRA coverage. However, you might have to give up your previous doctors and health provider when you switch from COBRA to Obamacare.
You should check with your state’s health exchange for more information on when to purchase a plan, what type of plan to purchase, the rates of your premiums, and which health networks are “in network” for your plan.
Do I Have the Choice to Purchase COBRA or Obamacare?
There is a limited time to purchase COBRA after you cease working for your employer. If you miss this window, there is no going back.
Fortunately, you may qualify for the special enrollment period for Obamacare. The special enrollment period allows people to enroll in different healthcare plans, who were unable to do so during the annual enrollment period. You are usually only granted special enrollment if you have certain circumstances, and a loss of employee health insurance usually qualifies.
You may also enroll in a health insurance plan during annual open enrollment in the fall. This year, Obamacare open enrollment goes from November 1 to December 15.
Be cautious though, because if you lose your COBRA coverage by not paying your premiums, you might not be eligible for the Obamacare special enrollment period. This would mean you would have to wait for the annual enrollment period, and would be without coverage for a few months, which is illegal, forcing you to pay a penalty tax.
Frequently Asked Questions
Q: Is it advised to choose COBRA over Obamacare or private insurance plans, if I have preexisting medical conditions?
A: You won’t necessarily be monetarily penalized if you sign up for COBRA coverage and have a medical condition. However, if your illness causes you to rack up the medical bills, you might want to get something with more coverage than your COBRA plan.
Your best bet might be to look into an Obamacare plan where you can choose your amount of coverage.
Q: Are there any options for me to reduce my COBRA premium?
A: You will likely be paying your entire COBRA premium on your own. However, there is an employer healthcare open enrollment period, where you can make changes to your group healthcare. If you have COBRA, you may also make changes during this time.
It is important to check with your previous employer’s human resources department for more details on this.
Q: Am I able to end my COBRA Coverage early?
A: There are certain circumstances that will allow you to terminate your coverage if you need to. COBRA coverage is supposed to be a placeholder to fill the gaps in healthcare when you are between jobs. Because of this, if you get another job with a company that also provides group healthcare, you may drop your COBRA coverage.
Another instance when you may drop COBRA is if you become eligible for Medicare during while your COBRA coverage is in force.
- COBRA Coverage and the Marketplace
- NPR: Laid Off And Looking For Health Insurance? Beware Of COBRA
- Weigh Options When Losing Health Coverage at Work: COBRA or Obamacare?
- What You Need To Know About COBRA Health Insurance
- COBRA Continuation Coverage Questions and Answers
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