AgileHealthInsurance Survey | 2015-10-27
Cobra and Its Alternatives
I’VE LOST MY JOB-BASED BENEFITS…NOW WHAT?
COBRA is designed to protect your job-based health insurance coverage. Whether you left voluntarily, were laid-off, or had your hours reduced so you no longer qualified for employee benefits, you can continue your health insurance coverage for 18 months. Some states and exemptions will allow you to extend that coverage period.
The coverage you have under COBRA is the same that you had as an employee. So if you included your spouse and children on your job-based plan, you and your family will continue to be insured under COBRA. If you had a PPO plan, you will continue with the same PPO plan. You can choose to reduce your coverage under COBRA. For example, if your whole family was covered originally, you can choose to cover only your children under COBRA. You cannot, however, change your plan. So if you had a PPO with your employer, you can’t change it to an HMO or vice versa. And you cannot expand your employer coverage. If you covered only yourself with your employer-based plan, you can’t add your spouse for COBRA.
While COBRA maintains your status quo, it does so at a price. When you were employed, your employer may have covered part, or all, of your monthly premium. On COBRA, you can be charged the full monthly premium plus an administrative fee for continuing your coverage, up to 102%. Your monthly COBRA payment can skyrocket. One study found that while the average monthly premium for an individual in an employer-sponsored plan is $490, over 80 per cent of that premium is covered by the employer. On COBRA, the same employee would be paying almost $500 a month plus administrative fees.1
You must exercise your right to COBRA within sixty-three days of losing your job-based benefits. If you don’t, then you will have to find an alternative.
Under the Affordable Care Act, you can only obtain Obamacare during Open Enrollment or during a triggering event, such as leaving your job. So if you’ve lost your job, you can obtain an Obamacare plan, but, you must do so within sixty days from losing your job-based benefits. Outside of this window, you cannot apply for Obamacare.
Obamacare is a good choice if you have a pre-existing condition, if you are planning to become pregnant, or if you want the full range of the Ten Essential Health Benefits that Obamacare guarantees—ambulatory, emergency, hospitalization, laboratory, maternity and newborn care, mental health and addiction treatment, rehabilitation services and devices, pediatric services, prescription drugs, and preventative and wellness services and chronic disease treatment.
Like COBRA, Obamacare can be expensive. The average monthly premium for a thirty-year old for an entry-level Obamacare plan (Bronze plan), is around $263; for a fifty-year-old, it jumps to $413.2 In addition, the provider network (doctors, nurse-practitioners, hospitals, etc.) is often quite narrow. While a provider may contract with an insurer, a provider may accept only one or two types from that insurer and often times, may not accept the insurer’s Obamacare plan.3
TERM HEALTH INSURANCE
Short Term Health Insurance is convenient. There is no enrollment period, you can apply for it anytime and it is designed for individuals seeking coverage for a fixed period of time, between a month or up to 11.4 It is an excellent alternative if you are going through a transition period—the gap between graduation and starting your new job, transitioning between jobs, or while you’re searching for a job. It can also be a much more affordable alternative to ObamaCare.
Short Term Health Insurance provides a broad network and covers doctor visits, hospitalizations, emergency care, lab tests, x-rays, and other common medical needs. It is also affordable. While it provides a breadth of coverage, it does so at a price that is less than half the price of Obamacare. In a recent study, we found that Short Term Health Insurance premiums were 66% less expensive on average than unsubsidized Obamacare Bronze plans.
There are two things to keep in mind when considering Short Term Health Insurance. First, Short Term Health Insurance is not ObamaCare. You have to apply and, depending on your health status (including pre-existing conditions), you can be rejected. Second, with Short Term Health, you may still be subject to the ObamaCare Tax. There are exemptions to the tax, however, and even if you do have to pay it, you may find that you still save money with Term Health Insurance. To learn more, read Does Short Term Health Insurance Make Economic Sense with the Obamacare Tax Penalty?
HOW TO CHOOSE
Losing your job-based benefits is stressful. As you leave your job, consider the next phase of your life, and contemplate your options, you have many decisions to make and financial numbers to crunch. As you sort through your health insurance options, take a look at the chart below. It’s meant as a tool to help you to make the choice that’s best for you.
|FACTORS||COBRA||OBAMACARE||SHORT TERM HEALTH INSURANCE|
|I prefer a broad network of doctors, hospitals, etc.||✓||✓|
|I prefer to maintain the same insurance I had from my job||✓|
|I, or a member of my family, has a pre-existing condition (cancer, diabetes, autism)||✓||✓|
|I have missed the COBRA election window||✓||✓|
|I have missed the Obamacare window||✓|
|I will only need health insurance for a brief period of time. Examples:||✓|
|I would like to save money||✓|
|I cannot afford a high monthly premium and I do not qualify for an Obamacare subsidy||✓|
|I need flexibility – I may need health insurance for only a month or 11||✓|
|I am pregnant or plan on becoming pregnant||✓||✓|
Sometimes, the best strategy is a creative strategy. If you and your spouse are in good health, but you have a child, then you might consider a hybrid approach. As long as your child was already covered by your job-based plan, you can cover your child through COBRA. That ensures that your child will keep the same benefits and doctors while you transition to a new job. You and your spouse can consider an Obamacare plan or a Short Term Health plan.
Similarly, if you know that you will be joining a new job-based health insurance plan in less than 90 days, a Short Term Health plan provides an additional advantage. Not only is the most affordable option, you likely will not be subject to the Affordable Care Act tax.
- Kaiser Family Foundation, 2013 Employer Health Benefits Survey (Aug. 20, 2013). http://kff.org/report-section/2013-summary-of-findings
- See https://www.healthpocket.com/individual-health-insurance/bronze-health-plans
- See Los Angeles Times, Obamacare doctors networks to stay limited in 2015 (8/19/2015)
- Maximum length of term can vary between states.
- Short Term Health Insurance vs. Obamacare