Understand what type of coverage COBRA insurance offers
Congress passed groundbreaking legislation in 1986 known as COBRA or the Consolidated Omnibus Budget Reconciliation Act. The law, for the first time ever, created a set of legal guidelines that protected employees and their families from suddenly losing health insurance coverage if they were terminated from, lost, quit, or retired from their jobs. It also covers employees who have their hours reduced and therefore no longer qualify for health insurance. Within this law, employees have the option to continue the health insurance plan they had with their employer for themselves and their families. So in simple terms, contrary to popular belief, COBRA insurance is actually a piece of legislation not an actual insurance plan. And this law, COBRA, allows you the choice to keep your health insurance for 18 months in most cases.
COBRA insurance has two key benefits that can make it a viable insurance option for many people and their families. First, since COBRA insurance is a continuation of your prior health insurance plan, it means you will have the exact same plan you had when you were employed. The advantages of this are many. First, you don’t have to spend time searching for a new health insurance provider, which for many can be a complicated and lengthy process. More importantly, nothing in your plan will change. You are able to keep the exact same doctors, visit the same hospitals, see the same specialists, pay the same amount for your prescriptions, spend the same amount for co-payments and deductibles, and maintain every other aspect of your health insurance plan. There is nothing new to learn and no new rules or regulations to follow.
Additionally, the other key benefit of COBRA insurance, is that by continuing the same health insurance plan, you do not experience a lapse in insurance coverage. This is important for two reasons. First, this means that at no point will you be responsible for paying exorbitant medical expenses without insurance. For anyone with ongoing health needs, regular doctor appointments, or expensive prescriptions, this is extremely important since in today’s healthcare market, medical expenses are sky high. Additionally, and perhaps more important for anyone with a preexisting condition, has to do with the HIPAA, or Health Insurance Portability and Accountability Act of 1996. This law states that you and your family members can not be denied from a new employer’s health insurance plan, or other new health insurance plan, for a preexisting condition as long as you do not experience a break in your health insurance coverage. That means that be electing to continue your coverage with COBRA insurance, you avoid a lapse in coverage and therefore potentially being denied coverage in the future.
Summary of Key COBRA Insurance Advantages
There are two key downsides to choosing to continue your health insurance with COBRA insurance. The first and biggest disadvantage for most people for COBRA insurance is the cost. The COBRA insurance guidelines stipulate that an employee must pay for the entire premium if they continue coverage with COBRA. Since most employers pay anywhere from 70-90% of health insurance costs, this leads to a significant increase when the former employee must now pay the entire premium. There is also an additional 2% administration fee that is added to the premium. According to recent market costs, COBRA insurance on average costs an individual upwards of $450 monthly and families upward of $1000 monthly. Since most people who need COBRA health insurance are recently out of work, this can be a impossible cost.
Additionally, the other key disadvantage of COBRA insurance, is that it is only a temporary solution. COBRA insurance, under the federal law, only lasts up to 18 months. That means that at the end of the 18 months, you will have to find a new health insurance plan. For someone who is confident that they will find new employment, that offers health insurance, this is not a deterrent. However, since this can be difficult in today’s economy, it can be a disadvantage for many people.
Summary of Key COBRA Insurance Disadvantages
Enrolling in COBRA insurance is actually quite simple. Under the law, your employer needs to provide you witha COBRA election form within 14 days of the qualifying event. Once you obtain that election form, you have 60 days to decide if you want to use COBRA and send in the form. Simply fill it out with the personal information for each person you wish to sign up and send it in with a check for the premium listed in the election notice. If at any point during the process you have questions or believe you are missing something, reach out to your group health insurer or former employer.
Lucky for us, there are many alternate options to COBRA insurance. Since COBRA insurance can be very expensive (over $1000 monthly for most families), and is only a temporary solution (lasting 18 months), many people find they need to look for another type of insurance plan. There are many options on the market and whenever you are considering COBRA you should always price out and explore other plans.