Losing your job can be a very stressful and scary time. If you are thinking of quitting your job to change careers, the thought of losing your health insurance may be holding you back. There are several options that can help keep you covered including COBRA.
COBRA or the Consolidated Omnibus Reconciliation Act was designed to help workers keep their insurance coverage even after loss of employment. COBRA provides peace of mind to many who suddenly find themselves without coverage provided by an employer. However, it can be expensive and the unknown can be daunting. With COBRA, your first course of action is to contact HR. BUT, there are other options for coverage such as:
If you need any help, we recommend that you work with a licensed broker. Doing so will provide you with third party support to help ensure you get the best plan at the lowest rate. Additionally, by working with a broker, you will absolutely not pay more. In fact, you might pay less. If you need any help, please feel free to contact us here at iHealthBrokers at (888) 918-0518 or schedule a call today.
What is COBRA?
COBRA is a way for you to continue with your exact same coverage even after you are no longer working for your employer. In the US, employers with more than 50 full time employees are required to provide insurance. They do so by paying for a part of the premium with the employee contributing to the remainder. If you have been enrolled in any type of insurance through your employer, you are most likely familiar with this type of group health insurance. Companies contribute to a portion of the premium and the remainder is withdrawn from your paycheck pre-tax which helps to lower your taxable income for the year.
Should you suddenly find yourself without coverage due to loss of employment, you may choose to sign up for COBRA. Doing so, will provide you with a seamless transition because COBRA will provide the EXACT SAME HEALTH INSURANCE that you are currently utilizing. Your provider will not change, your doctor will not change, and your spouse or dependents’ coverage will not change. For many, this is the easiest solution. There will be no gap in coverage because COBRA begins the day of the qualifying event. In this case, that would be the loss of employment. Even if you do not sign up right away the coverage is retroactive.
Am I Eligible for COBRA?
If you had coverage through your employer, you are most likely eligible for COBRA. Your employer is mandated by law to offer COBRA, if they offer health insurance to at least 20 employees. If not, they are subject to a tax penalty, so most choose to comply. You are eligible if:
- You are laid off
- You quit
- Your hours are cut back making you ineligible for insurance
- You are terminated (except for gross misconduct such as stealing)
When you sign up for COBRA, think of it like a new open enrollment period. You can change plans, add or remove a dependent, etc… And COBRA will cover anything covered by your previous insurance plan such as:
- And, of course, medical
You must make sure to sign up within 60 days after the end of your benefits. Usually your benefits extend through the end of the month, despite the end date of your employment. For example, if you leave your job on the 1st, you will usually still be covered through the end of the month. BUT, you should make sure to check with your employer’s HR department because, you only have 60 days. Your employer MUST provide an election notice within 14 days, but it is still in your best interest to stay on top of it.
How Long Will I Be Covered?
Coverage with COBRA begins the day of the qualifying event and is retroactive. Not only is the coverage retroactive, but the cost is as well. Meaning, that if you wait until the 60 days is over to sign up, you are still responsible for the payment for those initial 60 days.
COBRA will provide coverage for up to 18 month, 36 months under specific circumstances. For example:
- You become eligible for Medicare
- Legal Divorce or Separation
- Untimely Death
You can cancel COBRA at any time. Perhaps you’ve gotten a new job or wish to enroll in marketplace insurance during the annual open enrollment period, or maybe it’s just too expensive so you are going to forego insurance entirely (not something we recommend by the way). However, CHOOSING to end COBRA coverage does not trigger a special enrollment period if you are hoping to enroll in Marketplace insurance outside of the annual open enrollment period.
COBRA will more than likely provide you with enough support, but there are few things to take into consideration. It is possible to lose COBRA if:
- You move to a new area. You won’t technically lose COBRA, but there may no longer be local providers who participate in your plan.
- Your company goes out of business or stops providing health insurance for its employees.
Either of these events would trigger a special enrollment period which will enable you to enroll in Marketplace insurance.
Of course, you can also lose COBRA if you don’t pay for it…
How Much Does It Cost?
This cost is truly the biggest drawback of COBRA. COBRA works based on the policies held by you and your employer. Companies purchase these policies in volume and pass the lower rate along to you. However, these lower group rates do not necessarily mean that COBRA will be the least expensive option for you. Your employer covers a large portion of your health insurance premium with you contributing only a small percentage. With COBRA you are responsible for both your portion and your employer’s portion plus a possible 2% administration fee. This can make COBRA a financial hardship for many. However, it still may be your best option. If not, there are other options such as
- Short term health insurance
- Marketplace insurance
Cobra & Medicare
When you enroll in Medicare, your COBRA coverage will automatically be terminated. You want to make sure that you enroll in Medicare Part B at this time because COBRA does not count as creditable coverage. If you defer Medicare Part B in favor of COBRA, you will be liable for a late penalty which will be tacked on to your premiums forever. However, if you are eligible for Medicare, but want to keep COBRA for your dependents, you have the ability to do so. So, if and when you move from COBRA to Medicare, your spouse and your dependents will still be able to receive COBRA coverage for a total of 36 months.
COBRA and health insurance in general can be quite confusing. Should you have any questions, please feel free to contact us at (888) 918-0518 or schedule a call today.