Losing your health insurance benefits when you leave a job can be stressful. This article will explore COBRA insurance, Afford Care Act (ACA) plans, and term health insurance to help you sort through your options for health insurance going forward.
COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act, a federal law that is designed to pay to keep you and your spouse/family to keep your employer sponsored health insurance temporarily, usually up to eighteen months after your employment ends.
COBRA benefits are available to people who have involuntarily or voluntarily left their jobs, had their work hours reduce, have experienced a life changing event such as a death or divorce, or are transitioning to a new job. The benefits under COBRA are the same as you had as an employee. In other words, if you insured your spouse and family you will be able to have coverage for them under COBRA benefits. However you cannot add your spouse or family to COBRA coverage if they weren't insured under your job based benefit.
COBRA is an expensive alternative to employer based health insurance. Under COBRA coverage you can be charged the full monthly premium plus a fee for continuing your coverage up to 102%. According to one study the average monthly premium for a job based plan is $490 with over eighty percent of the premium paid for by the employer. With COBRA coverage the cost to the employee would be approximately $500 per month plus administration fees.1
You have sixty-three days from the date your job based benefits end to sign up for COBRA benefits. If you reject COBRA coverage, other health coverage options may include ACA marketplace plans, government Medicaid coverage, or term health insurance.
Affordable Care Act coverage is only available during the annual enrollment period or in the event of a life changing event such as losing your job. Enrollment in an ACA plan is only available for sixty days after losing job based insurance.
ACA health insurance is a good choice for people with pre-existing medical conditions, if you are pregnant or are planning to become pregnant or if you want a full array of coverage. ACA guarantees enrollees the Ten Essential Health Benefits:
Affordable Care Act coverage can also be expensive. Average monthly premium for an entry level bronze plan is approximately $263 for a 30 year old. The premium amount jumps to $4132 ACA health plans have a limited network of available providers (doctors, hospitals, nurse practitioners, etc) and your doctor or hospital of choice may not accept your ACA plan coverage.3
Term health insurance is a convenient choice. This type of insurance can be applied for at any time and is available for a fixed term or amount of time, up to 364 days.4 It is an excellent choice during a life transition, changing jobs, while searching for a job, or as you start your first job.
Term health insurance plans are affordable costing much less than a COBRA or ACA bronze level plan. A recent study showed term health insurance premiums were on average sixty-six percent less than premiums for an unsubsidized ACA bronze plan.5
A few things to keep in mind about term health plans include coverage under term health is not as comprehensive as it is under ACA plans or COBRA plans. Term health insurance applicants can be refused coverage for poor health or pre-existing conditions. Another consideration to keep in mind term health plans do not qualify under the Affordable Care Act requirements so you may be subject to the uninsured tax penalty. However, you may find that term health is still less expensive than the other alternatives even if you have to pay the penalty tax. To learn more read: Does Term Health Insurance Make Economic sense with the Obamacare Tax Penalty?
As you analyze your health insurance options, the chart below will help you make the insurance choice that is best for you and your family.
|FACTORS||COBRA||OBAMACARE||TERM HEALTH INSURANCE|
|I prefer a broad network of doctors, hospitals, etc.||✓||✓|
|I prefer to maintain the same insurance I had from my job||✓|
|I, or a member of my family, has a pre-existing condition (cancer, diabetes, autism)||✓||✓|
|I have missed the COBRA election window||✓||✓|
|I have missed the Obamacare window||✓|
I will only need health insurance for a brief period of time. Examples:
|I would like to save money||✓|
|I cannot afford a high monthly premium and I do not qualify for an Obamacare subsidy||✓|
|I need flexibility – I may need health insurance for only a month or 11||✓|
|I am pregnant or plan on becoming pregnant||✓||✓|
Sometime the best strategy when choosing an alternative insurance plan is to get creative. If you and your spouse are healthy you might consider choosing an Affordable Care Act plan or a term health plan. If you have a child, and you and your spouse are healthy you might consider choosing a term plan for you and your spouse and insure your child through the COBRA plan. If you are starting a new job and know you will have health coverage in less than ninety days, choosing a term plan might be the best strategy, it is the most affordable option and you may not be subject to the ACA uninsured penalty tax.
The best strategy is to choose a plan that fits your circumstances both financial and health wise.