COBRA Alternatives
Did you recently receive a COBRA letter about continuing your employer health insurance after leaving employment? There are other options. See below.
When you leave your employer for whatever reason, one of the important factors you must consider is how you will be covered by health insurance. Is COBRA (or State Continuation from small businesses) the only option? It seems expensive!?
But first, there is a question you need to be 100% sure you know the answer to. That question is,
“When does my health insurance coverage as a full-time employee end?”
The cost of your health insurance through work is shared by your employer and you. But if you leave an employer, for whatever reason, that cost-sharing ends. More importantly, the coverage ends! You need to know that date, the be able to secure coverage going forward.
1. Sometimes the date is the last day you are employed, that you actually work at the company (example, my last day is August 7, the health insurance as a full time employee ends at end of day August 7).
2. A majority of the time your health insurance plan continues as if you were a full-time employee (the premium cost-sharing) until the end of that month (example, my last day is August 7, the health insurance coverage as a full time employee runs through August 31).
3. And we are also seeing where some employers are extending this date you are covered as a full-time employee until a month or two into the future, as an extra benefit, because of a furlough, or layoff.
Four Options of Health Insurance After Leaving An Employer
1. COBRA or State Continuation Health Insurance Coverage
2. Individual Health Insurance, purchased through the Marketplace, or directly with the insurer.
3. Short Term Health Insurance, to bridge the gap between plans.
4. Medicaid
1. COBRA or State Continuation Health Insurance Coverage
“COBRA” is not coverage but an acronym for a Federal law that mandates for employers with 20 or more full-time employees, the employer and health insurance company must allow an employee who is leaving or moving to part time work to continue their exact health insurance coverage for a period of up to 18 months (in some cases for longer) after their status as a full time employee ends.
In many states, including North Carolina, similar laws exist that are almost a copy of the COBRA law for employers with fewer than 20 full-time employees. These state laws are called “State Continuation” laws. In either type the employee, if they choose to continue, actually remains on the group’s health insurance plan.
The big difference here is that during the COBRA or State Continuation period, you pay 100% of the premium cost. Many people will tell you, “COBRA is expensive!” That may be true, but understand this….the health insurance coverage costs no more or less than the health insurance did while you were a full-time employee. The employer is no longer helping pay.
An example, if the premium cost to cover you and your family was $1,600, and while employed, your employer paid $800, and you paid $800…in the COBRA or State Continuation period you would pay the full $1,600 to cover your family.
When you are no longer a full-time employee the employer, or insurance company, will send you the details of the health insurance coverage, what the premium cost is, and how to enroll and pay the premium costs. They must notify you within 14 days of your coverage ending as a full-time employee.
You have 60 days from the date your coverage ended as a full-time employee to decide whether you want COBRA (or State Continuation) health insurance coverage or not.
An example, I leave my employer on April 30th, and my coverage as a full-time employee ends April 30th. I have until June 29th to choose COBRA / State Continuation. If I do choose the coverage, the start date must be May 1, ensuring I had seamless coverage!
This is a great benefit that protects you, and offers you the gift of time…..to research other options and choose what is best for you and your family. How to best cover yourself with health insurance. In short, you have 60 days to research and decide which of the 4 coverage options are best.
2. Individual and Family Health Insurance
“Individual” health insurance is kind of a confusing term. That just means it is not a “group” plan, or employer-sponsored. The only eligibility needed for you to choose individual health insurance for yourself, or yourself and your family, is to be a resident in the state you live in. So in North Carolina, every North Carolina resident is eligible for individual health insurance plans in the state.
Individual and family health insurance plans look very similar to employer-sponsored plans in terms of benefits. In fact, some insurers offer the same benefit designs in their group and individual offerings. So you do not feel like you are giving up something by going with your own plan.
And “choice” is one of the best details of the individual plan designs, there are many of them! You can choose from among 10-12 plan designs from each insurer to fit your benefit needs and cost threshold the best. This is much more flexible than COBRA / State Continuation, which offers just the one plan design you were covered by as a full-time employee.
If individual and family health insurance is the best choice, there are two ways you may choose it:
Directly with an Insurance Company
If an individual or family’s income going forward is over the income threshold for receiving tax credits through the Marketplace they can still choose any available Affordable Care Act compliant health insurance plan available.
If this is the best choice we enroll them directly through the insurer, not the Marketplace.
(see the page “Individual Health Insurance Options” for more details)
Through the “Marketplace”
Most people who choose an individual or family Affordable Care Act compliant health insurance plan do so because we figure that they qualify for an instant tax credit to lower the monthly cost of premiums. This makes the monthly cost much less than COBRA.
If this is the best choice we enroll them through the Marketplace to confirm those monthly tax credits.
(see the page “Health Insurance with Tax Credits” for more details)
3. Short Term Health Insurance
Short-term health insurance plans are designed for someone needing health insurance for 1-4 months, someone between jobs and job-based health insurance. In short, these plans were designed as a low cost alternative to COBRA coverage for a short amount of time.
And the monthly premium cost of short-term health insurance can be 30-70% less than the COBRA cost!
Short-term health insurance plans work best for someone that either has a new job lined up, or is actively looking for a new job, so they estimate their need for coverage to be a few months, not indefinitely.
And the coverage is easy and quick to enroll in. We can enroll someone today, and the coverage can begin as soon the next day.
(see the page “Short-Term Health Insurance” to learn more)
4. Medicaid
If your job loss has sent your family income down to almost zero, or a very low amount, and you are afraid your job loss will last a while, you might feel like you cannot afford health insurance at any cost. In that case you may investigate Medicaid for a time.
Income qualification amounts are low, $1,470 monthly income max for an individual, $3,000 monthly income maximum for a family of four. If your income is currently under those number seek out your county’s Social Services Department (either online, via telephone, or in person) and they can help you apply for Medicaid. If granted, you would be covered by the Medicaid health insurance plan (this looks much like health insurance you are used to with copays for most medical services on your part, and Medicaid paying the remainder) until your eligibility ends. When your Medicaid eligibility ends, we can research and choose a health insurance plan for you, most likely through the Marketplace (and with an instant tax credit to bring down the cost).
How do you determine which of the 4 options is best? The math tells you the answer!
So how do you choose what is best? The answer is kinds simple and time-tested in theory, though the research involved can be time-consuming and even confusing. The answer is, “the math tells you the answer!”
-What does COBRA cost? How are the benefits of the plan?
-Do you qualify for instant tax credits to lower the cost of individual ACA plans? What are the costs? Do the benefits compare well with the COBRA plan you could choose?
-Short term health insurance, what is the cost? Does the lower cost work for you, even though the benefits can be less? How long will you need this coverage?
-Would you qualify for Medicaid?
In short, the details and the math answers your questions.
Conducting all this research may seem like a lot. It is easy for us, as an insurance broker, as we work with this every day. You can try to research yourself or call an insurance broker like us to ask for help. You do not pay for the research; insurance brokers do this work for you in case the best plan is one they can enroll you in and serve as your servicing agent throughout the year. The insurance company pays them to do that.
If we can be of help to you, in answering questions, or helping you choose the best health insurance plan for you (and your family), contact us, or complete the free quote and info request below. Chip will get back to you quickly to answer your questions and provide COBRA alternatives.
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