How COBRA Can Help You After Leaving A Job

Maintaining health insurance when you are changing jobs or retiring can be a major concern. With layoffs in the news, it is important to consider all of your options if you are not yet eligible for Medicare or coverage through a spouse. If you enjoy your current health plan, one tool to help ease that transition is COBRA coverage. The Consolidated Omnibus Reconciliation Act or COBRA is a means for employees with healthcare benefits to purchase their current insurance plan without the employer’s subsidy.

If you lose your job or retire before reaching age 65, you may want to continue your group coverage under COBRA for 18 months. You will have to pay the full premium yourself. Depending on the benefits of your health plan, the coverage can be very expensive.

If you have funds in your health savings account (HSA), you can use them tax and penalty free to pay for insurance premiums for health care coverage on your existing group plan through COBRA. You should also consider comparing the price of COBRA to that of an Affordable Care Act policy. Depending on where you live and your income, you may qualify for less expensive coverage.

Pros of COBRA

• You can maintain your same coverage – The Consolidated Omnibus Reconciliation Act or COBRA is a rule requiring employers to offer you access to coverage after separation of service for a certain amount of time. Rather than searching for a similar plan, you can use the same plan.
• It may still be at a lower cost than coverage through healthcare.gov – The cost of coverage is essentially what you would typically pay in premiums plus what your employer pays. If you work for a large company, the total cost can still end up being cheaper than going it alone in the exchange because of the cost savings the employer may have negotiated.

Cons of COBRA

• Coverage is available for only 18 months in most cases – Because the coverage only lasts 18 months, COBRA is only a temporary fix. However, the exchange may become your primary option once the coverage goes away.
• It is still substantially more expensive than what you probably pay today – If your employer covers a large portion of the cost of your insurance benefit, you may experience sticker shock

If you conclude COBRA is your best option here are few things to consider:

Contact HR. If you think COBRA is a likely option, reach out to your benefits department to determine how much it costs today. In the case of insurance on the federal exchange, price it now. Yes, there is a reasonable likelihood the pricing will change, but it will give you a baseline to plan.

Use your HSA Dollars. If you are eligible to contribute to an HSA, make sure you’re maxing out your contributions to the account now. You can use the account to pay for COBRA tax-free. HSAs cannot be used to pay health insurance premiums from the exchange, but you can use them to offset out-of-pocket medical expenses (and they can also eventually be used to pay for most Medicare premiums).

You may be eligible for more than 18 months. To extend the length of COBRA, notify the plan administrator if a qualified beneficiary is disabled or a second qualifying event occurs. For disability, an 11-month extension may be available if the disability existed during the first 60 days of COBRA and lasts until the end of the 18-month period. Notify the plan administrator of SSA’s disability determination within the initial 18-month period of COBRA and within 60 days after the latest of the qualifying event, SSA’s disability determination, or the date coverage would be lost. Failure to meet these deadlines could result in losing the right to the 11-month extension.

While not a long-term option, COBRA has functioned as a method to keep those who are in transition to not fall through the cracks medically. At a time when you may be facing great uncertainty, COBRA offers at least some level of stability until a new healthcare insurance plan is in place.