When Dale, 45, quit his job to take another position, he knew there was a three-month waiting period before he was eligible to join his new employer’s health plan. Around the same time, his friend Debra, 62, was laid off from her job and would soon lose coverage for herself and her spouse.
Luckily, Dale and Debra can both remain on their employer-sponsored health insurance under COBRA, also known as the Consolidated Omnibus Reconciliation Act. COBRA is a federal law passed three decades ago to give families an insurance safety net between jobs. It’s available if you’re already enrolled in an employer-sponsored medical, dental or vision plan, and your company has 20 or more employees. Your spouse/partner and dependents can also be included on your COBRA coverage.
Here are 5 questions to ask before signing up for COBRA benefits:
1. What is my deadline to enroll in COBRA?
Your employer has 44 days from your last day of work or last day of insurance coverage (whichever is later) to send out COBRA information. But it’s a good idea to check in with your benefits manager a couple of weeks after you leave.
You’ll have 60 days to enroll in COBRA — or another health plan — once your benefits end. But keep in mind that delaying enrollment won’t save you money. COBRA is always retroactive to the day after your previous coverage ends, and you’ll need to pay your premiums for that period too. One advantage of enrolling right away is that you can keep seeing doctors and filling prescriptions without a break in coverage.
COBRA allows you to keep the exact same benefits as before. No changes can be made to your plan at this time. However, if you’re still on COBRA during the next open enrollment period, you can choose another plan from those your former company offers to employees. The new plan will take effect on January 1.
2. How much does COBRA cost?
Most companies pay the majority of their employees’ health plan premiums, and the rest is deducted from your paycheck. On average, workers contribute 20% of the premium for individual coverage and 30% for family coverage. Under COBRA, you’ll be responsible for 100% of your premium, so your monthly COBRA payment may be 5 times higher than your payroll deduction.
Although that may seem like a lot of money, COBRA premiums are usually less than you’d pay on the open market ― because you’re still benefiting from your company’s group discount.
If you have a health savings account (HSA), you can pay your COBRA premiums from those funds. (Normally, insurance premiums aren’t an HSA-eligible medical expense.)
During the next open enrollment period, you may choose to switch to a less expensive plan. Premiums for high-deductible health plans (HDHP), for instance, are considerably lower than other types of plans for both single and family coverage.
3. How long will my COBRA coverage last?
Although COBRA is temporary, you’ll have time to find another plan. Federal coverage lasts 18 months, starting when your previous benefits end. Some states extend medical coverage (but may not include dental or vision) to 36 months. Check with your benefits manager to find out whether your state extends COBRA benefits.
Some benefits have a lifetime limit, but that’s not the case with COBRA. Each time you enroll, you’re entitled to the same benefits for the same period of time.
4. What are the alternatives to COBRA when I leave my job?
COBRA isn’t your only option when you lose your employer-sponsored plan. Depending on your situation, you may qualify for other health benefits:
- Join your spouse/partner’s employer-sponsored plan. Leaving your job triggers a special enrollment period that allows you to join your spouse/partner’s plan. Even if your spouse isn’t enrolled in their employer’s plan, your job loss allows you both to sign up outside the usual open enrollment period within 30 days. Find out how qualifying life events, like marriage or having a baby, affect your health coverage.
- Choose a plan through the health insurance marketplace at healthcare.gov. You don’t need to wait until Open Enrollment in the fall if you have a qualifying life event, such as leaving a job. You have 60 days to choose a plan, and your benefits will start the first day of the month after you lose your insurance.
- Enroll in a trade/professional group plan. You may be able to find plans with lower premiums through national organizations that offer benefits for independent workers, such as the National Association for the Self-Employed ($120/year membership fee; NASE.org) or the Freelancers Union (free membership; freelancersunion.org). No proof of self-employed status is required.
- Low- and moderate-income families may be eligible for the Children’s Health Insurance Program (CHIP). If you earn too much to qualify for Medicaid, you may be able to get your kids low-cost coverage through CHIP, which is jointly funded by states and the federal government. You can find more information on healthcare.gov.
If you’re 65 or older, learn about additional health insurance options.
5. What happens when my COBRA coverage runs out?
If you haven’t found a new job with benefits when your COBRA expires, you’ll need to choose from the alternatives listed above. Be sure to shop around ahead of time to avoid any lapse in coverage.
By asking the right questions about COBRA benefits, Dale and Debra can now choose the best health care options for them. It’ll give them one less thing to worry about so they can focus on the life changes ahead.
About the author
Christina Joseph Robinson is a veteran editor and writer from New Jersey who still loves to read the old-fashioned newspaper. She’s raising two fruit-and-veggie loving daughters to balance all the treats Grandma sends their way. Christina’s health goal is to resume her workout routine after being sidelined by injuries.