These days it happens more and more. You’ve been downsized, underemployed, divorced from someone with access to group health insurance, or your employer has simply decided to discontinue a workplace plan. What now?
Many times, the choice comes down to purchasing insurance in the private market via a broker, or to continue enrollment in the employer’s old plan via COBRA – a special program that entitles certain individuals to continue coverage under the employer’s old plan for up to 18 months.
COBRA doesn’t apply in every situation. If you were fired for cause or voluntarily left your employer for example, or if your employer did not have enough employees, you may not be eligible. To be covered under COBRA, an employer must have at least 20 employees, either full- or part- time, on 50 percent of its typical business days or more during the previous calendar year.
Also, there has to have been a ‘qualifying event’ to trigger COBRA eligibility. These include:
- Terminations for reasons besides “gross misconduct.”
- Reduction in hours worked
For dependents – that is, for spouses and children of workers in COBRA eligible plans, a qualifying event could involve a divorce or legal separation from the worker, the death of the worker, or the worker qualifying for Medicare and therefore losing eligibility for the workplace plan.
If you do lose access to your health care plan, and you are, indeed, covered under COBRA, how can you choose between continuing via COBRA or going out on the open market?
- Compare COBRA premiums with broker-sold quotes. Because of the way insurance companies price large groups, COBRA may make sense for older workers. Younger workers, on the other hand, may be better off going through an insurance broker because they can frequently offer better pricing for younger ages.
- Check open enrollment. By statute, you can only enroll in an ACA plan via the exchanges through March 31st.
In the Affordable Care Act Marketplace, you generally qualify for a special enrollment period of 60 days following certain life events that involve a change in family status (for example, marriage or birth of a child) or loss of other health coverage. If you don’t have a special enrollment period, you can’t buy insurance through the Marketplace until the next Open Enrollment period. Job-based plans generally allow special enrollment periods of 30 days.
- Calculate your income. If it’s below 400 percent of the poverty level for a family of your size, you may be eligible for a subsidy under the Affordable Care Act – provided you go through the online exchanges to purchase a policy. As of 2014, the cutoff for subsidy eligibility for individuals was an annual income of $45,960. The cutoff for couples is $62,040, and the cutoff for a family of five is $110,280. Amounts in some areas like Alaska and Hawaii are higher because of the comparatively high costs of living in those states.
- Examine provider networks. HMOs and PPOs tend to offer lower premiums than comparable indemnity plans, but restrict your options when it comes to providers, doctors, clinics and hospitals.
Many insurance policies available on the exchanges have severely restricted networks of authorized care providers. Keep that in mind as you shop for insurance coverage. If you are COBRA eligible, however, ask you HR department about some help paying COBRA premiums. Many times, severance packages also include some additional amounts to offset COBRA premiums for laid-off employees.
- Consider how much you have already paid toward this years’ deductible. Have you already had medical expenses this year? If so, that could be a vote in favor of COBRA, since your expenditures would count against any deductibles for this year. If you switch to another plan you may well have to meet a whole new deductible before benefits kick in.
Many times, a knowledgeable agent is able to bring a great deal of value to the table. Because an agent has a wider variety of plans to choose from, and he or she knows your personal situation, an agent can reduce the amount of time spent searching for the ideal plan and refer you to the insurance policy that is best tailored to your individual circumstances.
You can also consider Short term medical insurance as well.