Alternatives to COBRA
Health Insurance Options You Can Choose Instead of COBRA
Did you recently receive a COBRA letter listing the cost of the coverage? Did you roll your eyes? And make the “thumbs down” sign?
When you leave your employer for whatever reason, one of the important factors you must consider is how you will be covered by health insurance. Is COBRA (or State Continuation from small businesses) the only option? It seems expensive!?
First, let’s make sure you understand the definition of 3 different answers to a question you definitely want to ask as you receive information from your employer. That question is,
“When does my health insurance coverage as a full-time employee end?”
When you are a full-time employee you and your employer share the cost of your health insurance. But as an employee leaves a company for whatever reason, that cost-sharing ends. So it is important to know this date (the day you begin paying all of the coverage cost).
1. Sometimes the date is the last day you are employed, that you actually work at the company (example, my last day is August 7, the health insurance as a full time employee ends at end of day August 7).
2. A majority of the time your health insurance plan continues as if you were a full-time employee (the premium cost-sharing) until the end of that month (example, my last day is August 7, the health insurance coverage as a full time employee runs through August 31).
3. And we are also seeing where some employers are extending this date you are covered as a full-time employee until a month or two into the future, as an extra benefit, because of a furlough, or layoff (possibly as a result of Covid-19 (coronavirus).
Now, 4 choices you might consider for health insurance:
1. COBRA or State Continuation Health Insurance Coverage
“COBRA” is not coverage but an acronym for a Federal law that mandates for employers with 20 or more full-time employees, the employer and health insurance company must allow an employee to continue their exact health insurance coverage for a period of up to 18 months (in some cases for longer).
In many states, including North Carolina, similar laws exist that are almost a copy of the COBRA law for businesses with fewer than 20 full-time employees. These state laws are called “State Continuation” laws. In either type the employee actually stays on the group’s health insurance plan.
The big difference here is the employee pays 100% of the premium cost. Many people will tell you, “COBRA is expensive!” That may be true, but understand, it costs no more or less than the health insurance does while you are a full-time employee. The employer is no longer helping pay.
The employer, or insurance company will send you the details of the coverage, what the premium cost is, and how to enroll and pay the premium costs. They must notify you within 14 days of your coverage ending as a full-time employee.
You have 60 days from the date your coverage ended as a full-time employee to decide whether you want COBRA (or State Continuation) health insurance coverage or not. This is a great benefit that protects you, and offers you the gift of time…..to research other options and choose what is best for you and your family. How to best cover yourself with health insurance.
Note also that if you choose the COBRA (or State Continuation) health insurance the start date is the day after your coverage ended as a full-time employee, therefore ensuring seamless health insurance coverage. So don’t panic! You have 60 days to research and decide which of the 4 options are best.
2. Individual Health Insurance
“Individual” health insurance is kind of a confusing term. That just means it is not a “group” plan, or employer-sponsored. The only eligibility needed for you to choose individual health insurance for yourself, or yourself and your family, is to be a resident in the state you live in. So in North Carolina, where I am, every North Carolina resident is eligible for individual health insurance plans in the state.
Individual plans look very similar to employer-sponsored plans in terms of benefits. In fact, some insurers offer the same benefit designs in their group and individual offerings. So you do not feel like you are giving up something by going with your own plan.
Most people who choose an individual Affordable Care Act compliant health insurance plan do so because we figure that they qualify for an instant tax credit to lower the monthly cost of premiums. This makes the monthly cost much less than COBRA.
Another nice thing about the individual plan designs, there are many of them! You can choose from among 6-10 plan designs to fit your benefit needs and cost threshold the best. This is much more flexible than COBRA, which offers just the plan design you had.
(see the page “Health Insurance with Tax Credits” for more details)
3. Short Term Health Insurance
Short-term health insurance plans are designed for someone needing health insurance for 1-6 months, someone between jobs and job-based health insurance. In short, these plans were designed as a low cost alternative to COBRA coverage.
And the lower cost of short-term health insurance can be 30-70% less than the COBRA cost.
Short-term health insurance plans work best for someone that either has a new job lined up, or is actively looking for a new job, so they estimate their need for coverage to be a few months, not indefinitely.
And the coverage is easy and quick to enroll in. We can enroll someone today, and the coverage can begin as soon the next day.
(see the page “Short-Term Health Insurance” to learn more)
4. Medicaid
If your job loss has sent your family income down to almost zero, or a very low amount, and you are afraid your job loss will last a while, you might feel like you cannot afford health insurance at any cost. In that case you may investigate Medicaid for a time.
Income qualification amounts are low, $1,470 monthly income max for an individual, $3,000 monthly income maximum for a family of four. If your income is currently under those number seek out your county’s Social Services Department (either online, via telephone, or in person) and they can help you apply for Medicaid. If granted, you would be covered by the Medicaid health insurance plan (this looks much like health insurance you are used to with copays for most medical services on your part, and Medicaid paying the remainder) until your eligibility ended.
How do you determine which of the 4 options is best?
The math tells you the answer!
So how do you choose what is best? The answer is kinds simple and time-tested in theory, though the research involved can be time-consuming and even confusing. The answer is, “the math tells you the answer!”
-What does COBRA cost? How are the benefits of the plan?
-Do you qualify for instant tax credits to lower the cost of individual ACA plans? What are the costs? Do the benefits compare well with the COBRA plan you could choose?
-Short term health insurance, what is the cost? Does the lower cost work for you, even though the benefits can be less? How long will you need this coverage?
-Would you qualify for Medicaid?
With all these questions answered in one place, the health insurance plan to choose usually jumps right off the page at you. The math answers your questions.
Conducting all this research may seem like a lot. It is easy for us, as an insurance broker, as we work with this every day. You can try to research yourself or call an insurance broker like us to ask for help. You do not pay for the research; insurance brokers do this work for you in case the best plan is one they can enroll you in and serve as your servicing agent throughout the year. The insurance company pays them to do that.
If we can be of help to you, in answering questions, or helping you choose the best health insurance plan for you (and your family), contact us, or complete the free quote and info request below.
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