Jesse Smedley
Jesse Smedley is the Principal Broker for iHealthBrokers and the founder, president, and CEO of Smedley Insurance Group, Inc. and iHealthBrokers.com. Since the inception of SIG in 2007, Jesse has been dedicated to helping people save money on their health insurance by providing them with resources to educate themselves on all their health insurance options, both under age 65 and Medicare beneficiaries. He is featured in many publications as well as writes regularly for expert columns regarding health insurance and Medicare.
Losing your job can be stressful enough, but the thought of losing your health insurance on top of it can make matters worse. Fortunately, there’s a safety net in place through the Consolidated Omnibus Budget Reconciliation Act (COBRA), which allows you to continue your health coverage for a limited time after losing employment. But is COBRA the best option for you? Let’s break it down and explore some alternatives.
What is COBRA?
COBRA is a federal law designed to give workers and their families the ability to continue their employer-sponsored health insurance for a period after losing their job. The law is applicable to employers with more than 20 full-time employees. The coverage you had while employed stays the same under COBRA, so you can keep your doctors, specialists, and ongoing treatments without interruption. In short, it’s like pressing “pause” on your current health insurance and picking up where you left off.
How COBRA Works
When you lose your job, your first step should be to contact your employer’s HR department to discuss your options for continuing health coverage under COBRA. If you decide to enroll, the coverage is retroactive to the date you lost your job, as long as you sign up within 60 days of losing your health insurance. This means if you don’t immediately sign up but do so within the two-month window, you won’t experience a gap in coverage.
COBRA also covers not just you, but your spouse and dependents as well, making it a seamless option for families. However, there are a few important things to keep in mind when considering COBRA.
Duration and Cost of COBRA
COBRA coverage typically lasts up to 18 months, though it can extend to 36 months if Medicare is involved. However, the cost of COBRA can be quite high. Since your employer is no longer contributing to the premium, you’ll be responsible for the entire amount—both your portion and the employer’s contribution. In addition, a 2% administrative fee may be added, making it even more expensive.
For many, the cost of COBRA can be a financial burden, especially when no longer having a regular income from your job. This high cost is one of the main reasons why people explore other options for health insurance.
Other Options if COBRA Isn’t Right for You
If COBRA is too expensive or doesn’t seem like the best fit, there are other health insurance options to consider:
1. Marketplace Insurance Plans
The Health Insurance Marketplace (also known as the Exchange) offers health plans that can be more affordable, especially if you qualify for subsidies based on your income. These plans can provide coverage for essential health benefits and may even be a better option financially compared to COBRA.
You can apply for Marketplace insurance during a Special Enrollment Period (SEP) triggered by the loss of job-based coverage. Depending on your income, you may qualify for subsidies that reduce your monthly premiums, making these plans a more affordable option than COBRA.
2. Short-Term Health Insurance
Short-term health insurance plans are a temporary option, typically lasting from one month to less than a year. These plans are often less expensive than COBRA, but they come with limitations and may not cover all health care needs. Short-term plans typically don’t cover pre-existing conditions, and the coverage may not be as comprehensive as other insurance options. If you’re relatively healthy and need temporary coverage while transitioning to a new job or plan, this could be an option to explore.
3. Medicaid
If your income has dropped significantly due to job loss, you might qualify for Medicaid. Medicaid provides low-cost or free health insurance to individuals and families who meet certain income and other eligibility requirements. You can apply for Medicaid through your state’s health department or the Health Insurance Marketplace.
Special Considerations for COBRA Coverage
If you have Medicare or become eligible for it while on COBRA, your COBRA coverage will automatically end. However, you should enroll in Medicare Part B immediately, as COBRA is not considered creditable coverage for Medicare. Delaying Part B enrollment could lead to a penalty, which is a 10% increase in your premium for each 12-month period that you delayed enrollment.
One benefit of COBRA for people who are eligible for Medicare is that if you’re providing coverage for your spouse or dependents, they can keep their COBRA coverage for up to 6 additional months after you start Medicare.
Can You Cancel COBRA?
Yes, you can cancel your COBRA coverage at any time, especially if you find a job that offers health insurance or if you want to switch to a Marketplace plan during open enrollment. However, keep in mind that canceling COBRA does not trigger a qualifying life event for enrolling in Marketplace insurance outside of the open enrollment period. If you decide to cancel COBRA, you need to do so within the special enrollment period or face having to wait for the next open enrollment window.
Final Thoughts
While COBRA offers continuity of care and can be a good option for some, it’s often expensive and may not be the best choice for everyone. Depending on your financial situation and health care needs, there are other insurance options to explore, including Marketplace plans, short-term health insurance, or even Medicaid.
Before making a decision, it’s essential to weigh your options carefully and choose the plan that best fits your needs.
