When you leave a job (or are let-go from a position), it’s important to make sure you have adequate, affordable health insurance coverage in place for the time you’re between jobs.
There are many health insurance options that you can utilize to make this transition period a lot less stressful.
One of the first options that Americans consider is usually COBRA insurance.
While this insurance option has its time and place, it is definitely not for everyone.
Let’s look at what COBRA is and how it works, so that you can select the health insurance that is best for you.
What is COBRA?
COBRA (Consolidated Omnibus Budget Reconciliation Act) is a landmark federal law passed in 1985. It requires most employers with 20 or more employees to offer continuation of coverage to employees (and their families) who would lose health insurance coverage due to certain qualifying events, such as job loss, reduction in hours, or divorce.
The law allows workers to maintain continuity of coverage and avoid gaps in their health insurance. The employer must notify the health insurance plan administrator within 30 days of a qualifying event (like an employee quitting). Eligible employees get 60 days to elect COBRA for coverage.
COBRA is not a government-provided healthcare program. It simply allows you to keep the same healthcare coverage that you had while you were employed.
This means that you will continue to pay the same deductibles, and copays that you did while you were employed. However, your employer will no longer pay their portion of your premiums. Which means you will be responsible for paying the entire cost of your health insurance premium every month.
Some states have their own laws that require smaller employers to offer similar coverage. The states that currently have mini-COBRA laws for small employers include: California, Colorado, Connecticut, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, and Wisconsin.
It’s worth noting that the specific requirements and eligibility criteria for mini-COBRA coverage can vary by state. Consult your state’s laws or speak to a licensed insurance agent to get more information about your rights and options.
How much does COBRA cost?
According to the Kaiser Family Foundation, premiums for employer-sponsored family health coverage reached $21,342 this year, (or $1,778.50 per month) with workers on average paying $5,588 (about $465 per month) toward the cost of their coverage. On COBRA this same family would pay both their premium AND their employers, plus a 2% administrative fee, for a total of about $2,288 per month.Your final cost of COBRA coverage will vary depending on the group health insurance plan that you were enrolled in, as well as your location. COBRA premiums are often a significant expense, making it important to consider alternative options.
Why might someone use COBRA?
Why might someone not use COBRA?
Top 7 Frequently Asked Questions About COBRA Insurance:
COBRA is a useful option if you'd like to maintain your existing health insurance after leaving a job.
(Especially for people with pre-existing conditions or family members undergoing treatment.)
However, it’s important to count the cost of that coverage and consider all of your options.
If you find the monthly premiums too high, you can opt for a private health insurance plan or if you have many pre-existing conditions, you can search the marketplace for an ACA plan.
It’s important to carefully consider the costs and limitations of COBRA coverage and explore alternative health insurance options as well.
Use the free checklist below to help you evaluate which health insurance option may be right for you!