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COBRA Alternative Health Insurance

Health insurance protects you financially if you get sick or injured and need to seek medical care. In the U.S., 68.5% of people have private insurance coverage. Of those people with a private health plan, 55.4% get their insurance coverage through their employer. In this arrangement, if you get laid off or have your work schedule cut, you can potentially lose your health insurance coverage. 

Fortunately, while employer-sponsored health care plans are prevalent, they aren’t the only way to get coverage. If you lose your job or no longer qualify for health insurance from your job, you have several options, including coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) and other alternatives.

What Is COBRA?

COBRA is a health insurance program that lets you continue to use the health plan you had from your employer, even if you no longer work for the company. If you had insurance coverage through your spouse and got divorced, you can use COBRA to continue your coverage. Adult children can also often use COBRA to continue having health insurance once they lose access to dependent coverage.

COBRA lets you keep your employer’s plan for a set amount of time, usually anywhere from 18 months to 36 months. The caveat is that your employer no longer pays for their portion of the plan, so you need to pay the health insurance premiums independently. COBRA coverage is often considerably more expensive than an employer-sponsored group plan. In addition to paying the full cost of the premiums, you may also have to pay a 2% administrative fee.

You need to have or be several things to qualify for COBRA:

  • A qualifying event: A job loss can count as a qualifying event, as can a reduction in job hours. It’s important to note that if your employer terminates you for “gross misconduct,” you won’t qualify for COBRA. If someone else’s employer-sponsored plan covers you, and they lose their job, you may also qualify for COBRA. Spouses or dependents can get COBRA coverage if the covered individual becomes eligible for Medicare or dies. A spouse who divorces a covered employee can also qualify for COBRA. 
  • A qualifying beneficiary: A qualifying beneficiary is an individual who was covered by the health insurance plan on the day before coverage ended. Typically, qualified individuals include the employee, their spouse and their dependents. 
  • A qualifying plan: Not all employer-sponsored health plans qualify for COBRA. To have a qualifying plan, the employer needs to have at least 20 employees more than half of the time. Part-time employees count toward the 20 on a fractional basis. If a full-time employee is defined by 40 hours of weekly work, a part-time employee working 20 hours would qualify as half an employee.

What Do You Get Under COBRA?

If you choose to get COBRA coverage, the insurance you receive needs to be identical to the insurance received by employees. Usually, the coverage you get will be the same as your coverage when you were still working for the company or when you were still a qualifying individual on someone else’s plan.

If the plan changes while COBRA covers you, those changes might affect you. For example, if you have COBRA coverage when open enrollment begins, you have the right to adjust your plan or choose a different one, just as you would have when employed by the company. If your family situation changes while you have COBRA, such as if you adopt or give birth to a child, you can get coverage for the new member of your family.

How Long Does COBRA Last?

The type of qualifying event that occurs determines the maximum period of COBRA coverage available:

  • Job loss or reduction in hours: 18 months of coverage for the employee, spouse and dependents.
  • Death of covered individual: 36 months of coverage for the spouse and dependents.
  • Legal separation or divorce: 36 months of coverage for the spouse and any dependent children.
  • Enrollment in Medicare:36 months of coverage for the spouse and dependent children.
  • Loss of dependent coverage:36 months of coverage for formerly dependent children, such as adult children who recently turned 26.

Should You Use COBRA Coverage?

COBRA is meant to help you keep your health insurance, avoiding financial risk if you lose your job or your situation otherwise changes. Depending on your budget and health care needs, COBRA might be the right choice for you. It can provide bridge coverage when you are between jobs or help you continue to receive the medical care you need without paying high out-of-pocket costs. 

There are some drawbacks to COBRA that are worth considering. One notable disadvantage of the program is the cost of the coverage. When you work for an employer, it usually pays a significant portion of your health insurance premiums. Without that employer sponsorship, you need to pay the full premium price on your own, plus a 2% fee. COBRA might cost more than you can comfortably afford or more than you’d like to spend on health care coverage.

Another disadvantage of COBRA coverage is that you are at the mercy of your former employer. If the employer decides to change the health insurance plan it offers, you might end up with a plan that no longer fits your needs. The deductible might be too high, or the coverage available might not be suitable for your health care requirements. An employer can also cancel the health insurance plan, in which case you would lose access to COBRA and can end up uninsured for a period.

What Do You Get Under COBRA?

If you choose to get COBRA coverage, the insurance you receive needs to be identical to the insurance received by employees. Usually, the coverage you get will be the same as your coverage when you were still working for the company or when you were still a qualifying individual on someone else’s plan.

If the plan changes while COBRA covers you, those changes might affect you. For example, if you have COBRA coverage when open enrollment begins, you have the right to adjust your plan or choose a different one, just as you would have when employed by the company. If your family situation changes while you have COBRA, such as if you adopt or give birth to a child, you can get coverage for the new member of your family.

How Long Does COBRA Last?

The type of qualifying event that occurs determines the maximum period of COBRA coverage available:

  • Job loss or reduction in hours: 18 months of coverage for the employee, spouse and dependents.
  • Death of covered individual: 36 months of coverage for the spouse and dependents.
  • Legal separation or divorce: 36 months of coverage for the spouse and any dependent children.
  • Enrollment in Medicare:36 months of coverage for the spouse and dependent children.
  • Loss of dependent coverage:36 months of coverage for formerly dependent children, such as adult children who recently turned 26.

Should You Use COBRA Coverage?

COBRA is meant to help you keep your health insurance, avoiding financial risk if you lose your job or your situation otherwise changes. Depending on your budget and health care needs, COBRA might be the right choice for you. It can provide bridge coverage when you are between jobs or help you continue to receive the medical care you need without paying high out-of-pocket costs. 

There are some drawbacks to COBRA that are worth considering. One notable disadvantage of the program is the cost of the coverage. When you work for an employer, it usually pays a significant portion of your health insurance premiums. Without that employer sponsorship, you need to pay the full premium price on your own, plus a 2% fee. COBRA might cost more than you can comfortably afford or more than you’d like to spend on health care coverage.

Another disadvantage of COBRA coverage is that you are at the mercy of your former employer. If the employer decides to change the health insurance plan it offers, you might end up with a plan that no longer fits your needs. The deductible might be too high, or the coverage available might not be suitable for your health care requirements. An employer can also cancel the health insurance plan, in which case you would lose access to COBRA and can end up uninsured for a period.

Should You Skip Health Insurance Coverage?

Once you see the cost of premiums under COBRA and review your other coverage options, you might wonder if getting health insurance is worth the cost. If you’re relatively healthy, can you wait to get coverage? 

Usually, skipping health insurance coverage isn’t ideal. The cost of premiums might be high, but if you need medical care or treatment, your insurance coverage will either pay those costs or significantly reduce them. For example, without insurance, a three-day hospital stay can cost $30,000. With an insurance plan, the out-of-pocket cost you’re responsible for is limited to your maximum out-of-pocket expenses for the year, which is often much less than $30,000. Many insurance companies also negotiate with health care providers to lower the cost of care.

Having health insurance can also help you stay healthy. Preventive care, such as getting a flu shot or seeing your doctor for an annual checkup, is included with most health insurance plans, at no out-of-pocket costs to you. Getting regular care can help to lower your risk of developing certain diseases or help you detect and treat issues before they become significant concerns. 

When to Change Your Health Insurance Coverage

After leaving a job, perhaps you signed up for COBRA but have now found that it’s not working out for you. Your options for changing your insurance plan depend on a few factors. If your COBRA coverage is about to run out and it’s not open enrollment, you qualify for a special enrollment period and can switch to an alternative plan.

If it’s open enrollment and your COBRA coverage will continue, you can still change plans without issue. You can either purchase an ACA or independent plan or a short-term plan, depending on your circumstances. If your employer makes changes to COBRA so it no longer works for you, you have the option of switching before open enrollment begins again.

Get a Quote From Health for California

If your COBRA coverage is too expensive or is about to run out, you have options. Health for California can help you choose a health insurance plan that’s right for you. We can connect you to an individual or family health insurance plan and can help you understand the differences between each type of marketplace insurance plan. To find affordable health insurance, contact us for a quote today.

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