Losing your job is upsetting — especially when your employer-sponsored health insurance plan ends on the last day of your employment. But you have two promising options. COBRA and the Affordable Care Act (Obamacare) plans offer alternative health insurance that may well work for you. Here’s what you need to know about both.
Keep Your Coverage with COBRA
Passed by Congress in 1985, the Consolidated Omnibus Budget Reconciliation Act (COBRA) allows people who lose their employer healthcare coverage to stay on their former employer’s group health insurance plan for up to 18 months following their last day on the job. As an alternative coverage option, COBRA also permits dependents and spouses of former employees — even if the couple divorces — to retain coverage for up to 36 months. So, think of COBRA as a limited safety net when you are between jobs and have not found suitable insurance to buy on your own.
COBRA works best for individuals who have already invested a significant amount of money towards their plan’s annual deductible. COBRA coverage continues where the employer policy left off. For example, if you have a $5,000 deductible and have already spent $5,125 in claims, you have met your deductible. Congrats! That means your out-of-pocket costs for any additional medical services for the rest of the year will be greatly reduced because your insurer finally is obligated to pay most of your additional bills.
COBRA Can Be Inconvenient and Expensive
Enrolling in COBRA produces a paperwork gap. Once you decide to continue your old company plan and complete the COBRA paperwork, your healthcare policy must be formally reinstated. It usually takes weeks, so you will be billed for any medical services you get from the time your policy was terminated and when it is reinstated. These gap bills must be paid out of your own pocket. But don’t fret too much. You can file for reimbursement as soon as your health insurance plan is reactivated.
The real sting of COBRA is its cost. Your former employer will no longer contribute to your plan, leaving you to pay the entire monthly premium costs, as well as whatever your insurer was covering for your care, including any costs involving preventive care like wellness exams. Because of this, COBRA can be very expensive. On average, only one in ten individuals eligible for COBRA actually enrolls.
Obamacare Is Often More Affordable
Forgoing COBRA coverage in favor of an ACA Obamacare plan maybe your more affordable alternative.
Losing employer health insurance is an ACA “qualifying life event,” meaning you can apply for Obamacare insurance on the ACA Marketplace anytime within 60 days from your last day on the job. You may also qualify for a premium tax credit or cost-sharing subsidy to help pay for your health insurance costs through your state Exchange or on the federal Marketplace. Nearly 90% of individuals who sign up for Obamacare get government subsidies that make their health plans more affordable.
Coronavirus Special Enrollment Period
This spring, despite the ACA, the Trump administration was not allowing people who lost their health coverage because of coronavirus layoffs to immediately enroll in Obamacare, through the federal Exchange. However, California has re-opened enrollments for its Covered California Marketplace to June 30 for its citizens laid off because of the pandemic. At least a dozen states that run their own Marketplaces may be making similar moves as we write this, so it’s best to check with your state’s Insurance Commissioner.
Shopping For a Plan
If you have never shopped for a health insurance plan on your own, relax. Here are the top three things to review before you decide on a plan.
Understand what your out-of-pocket expenses will be.
To help figure out how much your out-of-pocket costs are and will be, ask the following questions. On average, how much have you spent on medical services for the past several years, and specifically, how much did you spend in the past 12 to 15 months? Are you a light user of healthcare, or do you see a physician and other providers several times a year? How many times have you been to the hospital?
Average your medical expenses from the previous 12 to 15 months. Add the cost of any significant procedure or medicine you may need. Then give yourself a financial cushion by slapping on another 15% to 25% to your monthly average for the coming year. That process will give you a decent baseline to determine your annual out-of-pocket costs, including the deductible you can afford on your own before your insurer starts helping you pay your medical bills.
Don’t forget prescription drugs.
Prescription drugs are often subject to a separate deductible within your insurance plan. If you take several medications, make sure you are comfortable with the drug deductible – and add it to your out-of-pocket expense list if you forgot to do so. Also, always make sure your specific medicines and their exact dosages are on the plan’s approved list, it’s formulary.
Verify that the provider network suits your needs.
If you love your doctor or see multiple specialists, you want to make sure all of them are in the plan’s provider network. Plan networks vary widely, so it’s important to verify with your health insurance company of choice that its network will give you access to your doctors, local urgent care facilities, and nearby quality hospitals.
Once you have a good understanding of these three considerations, you can begin shopping for a plan. If you are healthy and only use preventive services, you might be able to get by with a low cost, high deductible plan. Just make sure you have $5,000 to $12,000 in the bank that can cover your deductible if, for example, you have a car accident or develop a critical illness.
On the other hand, if you use medical services regularly, you might want to consider a higher cost, lower deductible plan. It can be less expensive to spend a little more each month in premiums for a healthcare plan that gives you better coverage for ongoing or regular care.
Health insurance for the unemployed is available — it’s just a matter of determining what you can afford for the level of coverage you want.