Weigh options when losing health coverage at work: COBRA or Obamacare?
When Amanda Lean decided to leave her full-time job to work as a private political consultant, she had a decision to make: continue with the insurance she had through her previous job — or shop for a plan on her own.
Keeping the insurance she had on the job meant signing up for COBRA (the Consolidated Omnibus Budget Reconciliation Act).
That’s the federal law that grants you the right to continue your employer-sponsored insurance coverage for 18 months after you leave your job. In California, you can keep it for 36 months.
“I had the COBRA option, which was super expensive, like three to four times what I was paying,” says the 29-year-old public relations professional from Orange. It came with a price tag of $1,400 a month.
“It’s egregious how expensive it is,” Lean says. So she opted instead to buy a plan on the private insurance market for $250 a month.
With COBRA, you pay the full price of your employer’s plan (your part and your employer’s), plus an administrative fee.
Because of its high price, “most people eligible for COBRA up until now didn’t take it,” says Karen Pollitz, senior fellow with the Kaiser Family Foundation, based in Menlo Park, Calif. Most people don’t realize how much their company pays for their health insurance.
According to the Kaiser Family Foundation, on average, employers pay roughly 73% of the health insurance tab for employees, and about 71% for family plans.
Despite its high price, COBRA has been a lifesaver for many Americans.
“Before, it was COBRA or nothing,” because the individual insurance market had so many flaws, Pollitz says.
Obamacare has changed all that. There are now many more options when you lose your insurance at work.
Under the Affordable Care Act, the loss of employer-based coverage now triggers what is considered a “qualifying life event.”
As a result, people leaving — or losing — a job can continue the policy offered by their employer under COBRA, or they can buy one on their own in the private health insurance market. Those with qualifying incomes who shop through the state’s Affordable Care Act exchange, Covered California, may be able to get financial help paying for coverage.
The best choice will depend on a number of factors, experts say. Here are some tips:
Be aware of enrollment deadlines. Once you lose your work-based insurance coverage, the clock starts ticking.
“If people lose their job and insurance, sometimes they don’t think about having a window of time to take action. It’s not the first thing that comes to mind,” says Carrie McLean, customer service director for the private insurance exchange EHealth.
You have 63 days to enroll in COBRA from the time your employer-based coverage ends. You can wait the full period to enroll, but if you ultimately decide to take the coverage, you will be required to pay all of your premiums retroactively for the prior two months.
Under Obamacare you have 60 days from the termination of your job-based plan to enroll in a self-purchased individual or family health insurance plan. Miss these windows and you’ll have to wait until the next open enrollment period.
Do the math. Obviously, you’ll want to compare the price of COBRA to what’s available to you on the private insurance market.
According to the Kaiser Family Foundation, the average employer health insurance premium in 2014 is $9,950 for individual employees and $16,834 for family coverage.
By contrast, a recent Health Insurance Price Index report by EHealth found that average premiums for health insurance purchased on the private market were $3,252 per year for individual coverage, and $8,004 for family coverage.
Naturally, plan costs and benefits vary widely.
Beyond the monthly premium, remember also to compare the out-of-pocket expenses associated with each plan, such as co-pays and co-insurance, that you may have to pay when you go for medical care.
Don’t forget about subsidies. The Affordable Care Act makes subsidies available to people with annual incomes below about $46,000 and for families of four with household incomes up to about $94,000. People with lower incomes may also qualify for help paying their out-of-pocket costs when they go for care.
But keep in mind that subsidies are based on your total income for the year. So for some recently jobless people, timing will make the difference between qualifying for help or not.
“If it’s January and I’ve made $5,000 this year and I don’t know what I’ll make the rest of the year, maybe a Covered California plan is not a bad deal,” says Craig Gussin of San Diego-based Auerbach & Gussin Insurance and Financial Services. “If we have the same conversation in September and you’ve made a lot more money, it’s a different situation.”
Consider staying put if you’re in treatment. If you’re currently undergoing medical treatment, keeping the same doctor and insurer with COBRA may be the way to go, Pollitz says.
“If you’re pregnant or in the middle of chemotherapy, now just may not be a good time to change your plan, to change your doctors, and to restart your deductible if you’ve already met it for the year,” Pollitz says.
An open enrollment period now comes around once a year, giving you the option to change plans on a regular basis as your needs change.
With COBRA, you’re also entitled to change plans during your former employer’s open enrollment period. “It’s like you’re an active employee,” says Bruce Benton, executive vice president for Genesis Financial & Insurance Services in Tarzana.
Consider your age. Insurers selling policies to individuals are allowed to charge more for coverage based on a person’s age, whereas with most employer-based plans your rate is the same whether you’re 23 or 49.
“At the younger ages, it’s likely you’re going to find a better deal on the private market because you’re not blended with all the other employers,” Benton says. “At the older ages it may end up being to your advantage to stay under COBRA.”
Lean, the public relations pro who left her job to work as a consultant, is now working full-time again for a company offering workers health insurance.
She’ll drop the private plan and pocket the money she was spending each month for coverage.
Now, she says, her company is paying the full amount and her bill “is going to be 100% covered.”
Zamosky is the author of “Healthcare, Insurance, and You: The Savvy Consumer’s Guide.”
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