Cobra insurance is simply a continuation of health insurance after leaving your employer. Cobra stands for The Consolidated Omnibus Budget Reconciliation Act of 1985. That’s great and all, but what is cobra insurance exactly…
What is Cobra Insurance?
Cobra insurance is literally a continuation of the same health insurance you had while working for your employer. The COBRA law was passed by congress and signed by President Ronald Reagan. It allows some employees the ability to keep the same group health insurance coverage even after leaving the employer. Not all benefits are required to continue, but at a minimum you usually will have the option to keep your medical, dental, and vision insurance.
How Much Does Cobra Insurance Cost?
Historically, the cost of cobra has been considered very high relative to the other health insurance options that are available. However, with the rising costs of the ACA (Affordable Care Act, Obamacare, The Marketplace, etc.) plans; cobra insurance has been a more popular option for people to choose after leaving an employer. Unless you are healthy and qualify for a lower cost “underwritten” health insurance policy, you are stuck with choosing either cobra insurance or an ACA marketplace plan.
The cost of Cobra insurance will vary depending on several factors. Cobra coverage cost is influenced by your age, location, qualify of plan, and amount of family members on the plan. You will usually pay more for Cobra insurance than you were paying for the same coverage while employed. That is because your employer was required by law to pay a portion of the cost. Under cobra, even though you can keep the same insurance coverage, the employer is no longer required to pay a portion; so you are often left paying the full price of the Cobra insurance.
Why Choose Cobra Insurance?
When leaving an employer (especially if it was unexpected), it might be extremely difficult to pay the cost of Cobra insurance. So why do some people choose to go with Cobra coverage?
Often, the quality of a group health plan through an employer is higher qualify than what can be purchased out on your own. People choose Cobra because they really want to keep the same level of coverage, despite it’s cost. Another big factor in the decision process is whether or not you have already met your deductible. If you have health issues going on, meeting your deductible for the year, means that your out of pocket costs have lowered. If you choose a different insurance, your deductible will reset with the new insurance plan. When you choose Cobra insurance, not only will you keep your same coverage’s, but you will also be able to keep the status of your deductible and out of pocket maximum.
Why Not to Choose Cobra Insurance?
Unless you have health issues going on and you have already paid a substantial amount towards your deductible and max out of pocket for the year, there really isn’t a good reason to choose Cobra insurance. Unless for some reason the cost is reasonable compared to other options, which can vary by the State you live in. If you are health or haven’t paid much towards your deductible for the year, there are most likely other health insurance options that are more affordable and make more sense.
What Are My Options Other Than Cobra?
Looking for a more affordable option than Cobra insurance? I don’t blame you. Cobra insurance can seem very expensive. If you are offered Cobra insurance, that means you recently lost your employer health insurance. Depending on the State you live in, you might have several options for other more affordable health insurance. The easiest way to shop your options is to get a health insurance quote. Below are three examples of possible options for you other than Cobra insurance.
1. Affordable Care Act (ACA, Obamacare, Marketplace, etc.)
Yes, despite what you might hear in the media, Obamacare is still around. It still the main source for major medical policies when you purchase health insurance on your own. Losing employer coverage is often considered a “qualifying life event”, or “QLE”. A QLE can give you a “special enrollment period” which then allows you to enroll into the Affordable Care Act. As we all know by now, the Obamacare policies tend to be the most expensive option for health insurance. The premium is high because these policies are designed to cover preexisting conditions and have a lot of coverage’s included whether you want them or not. However, depending on your household income, the Obamacare policies might be a lower cost for you. If you have preexisting conditions, these ACA plans are often the best option for you, despite the cost.
2. Short Term Medical Insurance (STM)
Short term medical insurance policies have grown in popularity because of their lower price and coverage’s they offer. Unlike the ACA plans in option 1 above, the coverage’s provided by a STM policy can vary from one policy to another. So make sure you pay attention when the insurance agent is going over the coverage’s with you. Short term medical insurance policies have gotten some bad press in recent years because of their limitations compared to the ACA plans. The criticisms, for the most part, come from people who are proponents of Obamacare. Usually, the criticisms are because of a lack of understanding of the coverage’s. Short term medical policies will function similarly to typical health insurance. They usually have a deductible, coinsurance, max out of pocket, and some will have copays for doctor visits; among other typical health coverage’s.
One of the biggest differences with a STM policy is the exclusion of coverage for preexisting conditions. Yes, these policies will exclude coverage for medical services related to a preexisting condition. That’s why the monthly premium cost is a lot lower with this option. If you have preexisting conditions, a STM is most likely not the right policy for you, even if the price is attractive. With STM’s, they tend to be a lot more flexible with coverage options, pricing options, doctor networks, coverage regions, etc. Because of the flexibility and the lower price, short term medical policies have become very popular among healthy people. Not all States allow STM’s.
3. Limited Medical Insurance
Another option for you, other can Cobra Insurance, can be a Limited Medical insurance policy. The title of the policies come from it’s limitations on coverage. Generally, just like the STM policies, you need to be healthy enough to pass some underwriting questions. These policies often have an even lower monthly premium price than short term medical policies. They tend to offer a wide range of coverage categories, without a deductible, and with a lower price. Because of all this, they tend to be a popular options for people on a very strict budget and want some sort of coverage rather than none.
Experts Opinion on Cobra Insurance
There is nothing wrong with Cobra insurance, as long as you have been happy with your employer coverage. It can be expensive, because of that there might be better options for you to explore. If you have major preexisting conditions, then either Cobra insurance or Obamacare is most likely the best option for you. If you need temporary coverage between jobs or are fairly healthy, a short term policy might be a good fit.
Unfortunately, health insurance has become politicized and some State governments (often those with their own State exchange for health insurance) try to limit the options for consumers and force everyone onto certain types of policies that the politicians think are best. Some of the worst States to live in for consumer health insurance choices include: New York, California, Washington, Minnesota, and Connecticut. These States and some others, have very few options for health insurance, making it harder to have more affordable health insurance choices.