If you’ve ever been laid off or left your job voluntarily, you may have looked into COBRA — and found that it would cost you a small fortune to continue your health insurance, especially since the government no longer subsidizes COBRA costs.
Luckily, there are alternatives in today’s insurance market. Here’s what you need to know:
Basics of COBRA
First, let’s talk about some of the basics of Consolidated Omnibus Budget Reconciliation Act insurance. Essentially, this program requires insurance companies, in certain situations, to offer continued health care coverage when you leave your job or are fired. If you’re job hunting or will otherwise have a health insurance lapse, COBRA ensures that you and your family have health care coverage.
The Department of Labor offers this helpful pamphlet on COBRA. It includes information on rules and regulations, including whether you’re eligible for continuation coverage. The most important thing to know about COBRA is that it’s expensive. Most of us don’t realize how much of our health insurance premiums are paid by our employer. With COBRA, your employer no longer pays its part, so you’re responsible for the entire premium.
Once you get over the sticker shock, you may find that COBRA is the best option for you and your family because it keeps the level of coverage you’re used to. In many cases, though, you’re better off using one of these alternatives:
1. Take your chances?
It’s tempting to simply take your chances without health care coverage, especially if you have only a few weeks between losing insurance through your old job and getting it through your new one. This can be a really terrible idea.
My husband and I did this once. It was unintentional and had no serious consequences, but it could have. Here’s why we had a health insurance lapse:
My husband left his job April 2 and started a new job right away. We were able to keep our old insurance coverage through the end of April, and his new insurance would kick in at the beginning of May.
We knew we’d have about a four-day lapse in coverage but decided to chance it, rather than pay a fortune for COBRA. In terms of risk, this seemed like our best choice at the time.
What we didn’t know was that even though we had signed up for the new insurance right away, it would take weeks for our new insurance to be processed. Our family didn’t have insurance coverage for nearly two months in the meantime.
Luckily, we didn’t have any medical emergencies. But we were lucky, particularly because my husband is accident-prone and our daughter was just learning to climb all over everything.
Even though this worked out for us, I wouldn’t recommend it. In fact, if I’d known then how long it would take for the new employer coverage to kick in, I would have just sucked it up and shelled out for COBRA. Imagine the financial situation we’d be in if one of us had needed to go to the emergency room. The medical bills would likely have driven us into bankruptcy.
Lesson learned: It can take much longer than you think for your new insurance coverage to start, so don’t risk it.
2. Short-term insurance policies
When compared with employer-sponsored insurance plans, short-term health insurance is expensive. When compared with COBRA, however, it may be quite affordable.
These policies are written specifically for when there’s a lapse in your coverage. It’s best to opt in to one of these plans only when you know you’ll have new coverage picking up relatively quickly. In fact, these policies can now only last three months because of ACA-related government regulations.
Short-term policies are perfect if your situation is like ours: you have employment lined up but may not have insurance coverage for a couple of months.
Oftentimes, these insurance policies cover the bare minimum of medical expenses, so you may need to put off routine checkups until after your new insurance kicks in. However, these policies can give you a more affordable way to avoid bankruptcy in case of a medical emergency.
3. Shop the exchange
Even if you’ll likely eventually be eligible for employer-based healthcare coverage, you can shop for new coverage at HealthCare.gov. Under the Affordable Care Act, you can apply for Marketplace coverage 60 days before to 60 days after you lose your job.
Exchange plans can be very expensive, especially if you’re searching for a policy that offers similar coverage to a great employer-sponsored plan. But most of these plans will be cheaper than COBRA. And if your income is in the right bracket, you can still get subsidies to help you pay the premiums on your plan.
With all this said, it’s important to keep your eye on the political situation. As of this update (July 2017), some are attempting to either repeal or replace the ACA, aka Obamacare. It’s uncertain what will happen with the healthcare exchange over the next few months or years. So do your research before planning to fall back on this option.
4. Try a health sharing plan
As of this update, health sharing plans count as healthcare coverage under the Affordable Care Act. In other words, you won’t have to pay a penalty for being uninsured if you use a medical sharing plan.
These types of plans are similar to catastrophic healthcare coverage. They don’t usually pay for your everyday doctor’s appointments. But if you have a baby, wind up needing surgery, or get into an accident, they’ll pay part of those costs.
With these plans, all members pay into a pool of money. Then when you have an eligible medical bill, the plan will cover part or all of that bill, depending on the policy. Plans like these can be a more affordable way to get coverage if you qualify. Just be aware that they may have strict health-related policies, including being under a certain BMI. And you may need to sign on to the plan’s statement of beliefs in order to get coverage.
5. Mixing policies
It’s important to note that you may need to blend your healthcare coverage during times of transition. For instance, it may take a month or more for your ACA exchange coverage or medi-share coverage to kick in. If this is the case, it may be wise to stick to your COBRA plan in the meantime. A hefty health insurance bill you know about is better, after all, than an unforeseen hospital bill for $10,000+.
When you receive your COBRA notice, you can usually decide which family members to leave on the COBRA plan. You may decide on a mix-and-match approach, depending on the cost of these other options.
The bottom line, though, is that being without healthcare in today’s increasingly expensive environment doesn’t make financial sense. Y
The Bottom Line
The bottom line here is that paying for health care insurance outside of full-time employment is always expensive. But if you look at your options and shop around, you may be able to avoid the high costs of COBRA while still protecting yourself in case of a medical emergency.