Losing your job comes with endless questions, anxieties and uncertainties. One of the major concerns is what will you do for health insurance? Without group insurance, it’s difficult to find a private marketplace plan on your own. But health insurance is now required for almost all Americans and it’s not something you can afford to go without. So what are your options when health insurance is no longer available through your employer?
One option is to buy a plan from the health insurance marketplace set up under the Affordable Care Act. This coverage may not be adequate for your medical needs and may not cover visits to your doctor. The other option is to continue with your current health insurance under the Consolidated Omnibus Budget Reconciliation Act, better known as COBRA.
COBRA is a federal law requiring most employers to offer temporary extended coverage to employees under specific circumstances. These circumstances include when you lose a job or quit, when you divorce a spouse who carries the insurance, or when that spouse dies.
Am I eligible for COBRA?
Most employers have no choice but to comply with COBRA, so if you lose your job, you’re likely eligible. However, if your business has less than 20 workers, doesn’t provide health insurance benefits, or falls under certain government or church-based organizations they are exempt from having to provide COBRA.
How does it work?
When you’re employed full-time with benefits, your employer paid a portion of your health insurance premiums. On average, workers pay 18% of individual premiums and 29% of family premiums, with employers picking up the rest. Under COBRA, your coverage is still available but your former employer doesn’t have pay a cent toward the cost.
Is it expensive?
Unfortunately, yes. Because you’re now footing the entire bill without assistance of an employer, COBRA health insurance costs are the full cost of the plan, plus a 2% administration fee. However, if you know you’re going to be terminated, you can plan ahead by adding to your HSA or FSA plan and use that money to pay for medical care. COBRA payments are also tax-deductible if you itemize.
How long am I covered?
You must decide whether or not to participate in COBRA within 60 days after losing benefits. You can stay on your COBRA plan anywhere from 18 months to three years after you are terminated or quit your job. Your eligibility is based on your individual circumstance. For example, if you’re terminated, lose benefits due to decreased hours, or quit your job, you’re eligible for 18 months. If you become disabled or divorce, you’re eligible for benefits longer. You may qualify for an 11-month extension of COBRA after it expires. Your COBRA premiums can be as high as 150% of the employer premium though.
Just because you qualify for COBRA doesn’t mean you have to take it, or that you should. There are other options like private health insurance, Medicaid, etc. If you choose to accept COBRA coverage, keep in mind that it’s not meant to be a long-term solution for health care coverage. Because of the high costs involved, it is only designed to be a short-term solution to cover you and your family until you are able to find benefits through another employer, or through the health insurance marketplace.