Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that requires large employers to offer employees and their dependents the opportunity to maintain their health care coverage when there is a qualifying event that would otherwise result in termination of coverage.
Qualified beneficiaries can include:
- the employee (or retired employee)
- dependent children (Certain newborns, newly adopted children, and alternate recipients under Qualified Medical Child Support Orders may also be qualified beneficiaries)
- covered under the group health plan, depending on the type of qualifying event.
Most Oregon employees are offered COBRA health insurance after leaving an employer’s group insurance plan. The premiums are often very high. The premium offered in a COBRA coverage is the total cost of your actual health insurance plan. (the portion you paid + employer’s contribution) Large employers mainly offer a low deductible and small copay for doctor visits and prescription coverage.
COBRA is temporary and will only last 18 months. After that period, most will be eligible for portability. This intends to secure coverage until insurance is obtained from another source, such as a new employer. Employers do not need to pay for any portion of the premiums for the COBRA plan. Still, the beneficiaries maintain their insurance at group rates at a lower cost. The premiums will get higher than COBRA if you become ill during the 18 months. You will have no choice but to endure high premiums.
The premium for these plans comes as a surprise to most people. Since the plans are not underwritten, premiums are higher, but guarantees that no matter what your health situation is, you are covered. The cost for a similar individual (or underwritten) plan is around 40% less than a COBRA premium.
Currently, there is a stimulus act if you were laid off from work that allows 65% of your premium to be paid for. The subsidy is active for the first nine months of COBRA benefits.
Due to high costs, COBRA is not a prime choice for people living on a budget since the monthly premiums are sky-high. Here are some affordable alternatives that you may want to consider.
- Apply for an individual plan that fits your needs. Premiums will be typically lower if you qualify for an individual Oregon health insurance plan. The nine-month subsidy is very helpful, and it would be better to apply at the beginning of the eighth month of the subsidy. Keep in mind every Oregon insurance agency or provider has different guidelines. It is also important to note that practically, one does not need a benefit-rich plan as offered through their employers. Most people need a primary medical policy to protect themselves against significant losses. You would want to avoid pre-paying the insurance company for services you may never need, so you better prefer a plan with low premiums that suits your coverage needs.
- Set apart family members’ plans. Each of your family members can have individual coverage needs. You may want to consider maintaining the COBRA coverage of your dependent with health conditions and separate family members with no health issue to individual plans with lower costs. If you have only one child, it may be a smart move to get their plan since many COBRA plans charge you for “children” regardless of how many are listed.
- Enroll with a Private, Off-Marketplace Plan. Premium and deductible costs may be higher in off-Marketplace plans. However, coverage sold outside the ACA exchanges could offer other benefits, such as out-of-network coverage.
- Sign up For Short-Term Coverage. These plans provide temporary health coverage for those who may be caught in the middle of a major medical insurance plan or on the verge of losing coverage. These health plans may not provide as much coverage as a Marketplace healthcare plan, but they are much lower cost and can serve as an alternative solution until you get more comprehensive coverage.
COBRA and Medicare
The correlation between COBRA and Medicare is up to which form of coverage you have first. For some instances, there is a possibility that you may get COBRA if you already have Medicare. Still, it is not usually possible to maintain COBRA if you have it before your eligibility to Medicare.
Cobra coverage usually ends on the date when you begin with your Medicare plan. You must sign up for Part B coverage immediately since you will not be entitled to SEP (Special enrolment Period) when your COBRA plan ends. The good thing is your spouse and dependents may maintain COBRA for up to 36 months, regardless of whether you enroll in Medicare during that time.
It is essential to be aware that you may consider keeping COBRA coverage for services not included on your Medicare. You are allowed to enroll for COBRA coverage if you have Medicare Part A or Part B . Medicare will be your primary insurance, and COBRA is secondary. You must keep Medicare because it covers most of your health care costs. COBRA is typically high in cost, but it may be helpful if you have high medical expenses and your plan covers your Medicare cost-sharing or offers other benefits.
In the case of Medicare-eligible individuals with ESRD ( End- Stage Renal Disease), COBRA coverage is primary during the 30-month coordination period. Research and learn first about the ESRD Medicare rules or speak with a reliable Insurances resource person or representative for a guided coverage decision.
COBRA vs. ACA
When coverage terminates due to job loss or quitting a job, having COBRA is an option to maintain employer’s group health coverage for you and your dependents. Use it at your own expense for a certain period ( usually 18- 36 months) until you get a new plan under a new employer. But practically, some will opt for more affordable coverage under the Affordable Care act or individual plans in the marketplace. Typically, ACA is at a lesser cost than COBRA coverage since with ACA, and one is eligible for federal subsidies depending on the income. It depends on individual circumstances in choosing COBRA or ACA Health insurance coverage. For some, ACA affordability and the opportunity to pick different health insurance plans, especially if the previous employer-sponsored insurance no longer fits the health needs, is the best option. But for others, others may want to enroll or keep their COBRA coverage for an easier route if they are about to have a new employer-sponsored coverage coming up.
In weighing between these two, it is best to consider both your financial status and health needs to avoid insurance problems in the long run. Make sure to explore more and ask for a reliable health insurance representative about the factors to consider to come up with a sound insurance decision.
All about COBRA
One might have an option to acquire COBRA if their employer-sponsored health coverage is under COBRA during qualifying events. (losing or quitting a job) Under qualifying circumstances, the employee’s spouse and other dependents (children) will also be covered. They can keep their COBRA coverage even if the employee (or retired employee) becomes entitled to Medicare, or the couple gets into divorce or legal separation or passes away. Note that each qualified beneficiary is independent of others which means they have options on what coverage they can get under COBRA.
COBRA plan can be retroactive, which may ease the worries during the enrollment window. If you decide to pay for COBRA premiums retroactively, your coverage will also be retroactive. This will enable you to reimburse medical bills that would have been covered during the enrollment window once you enrolled. Cobra coverage typically lasts 18 to 36 months, depending on the circumstance.
The cost of COBRA insurance depends on what plan you are with. Your coverage will not change. However, you will pay for the whole month’s premium, and there is an addition of 2% for the COBRA administration fee.
A closer look at ACA
With ACA health insurance coverage, almost all Americans are eligible to enroll. Even those who are not US citizens, depending on their status. The only exceptions are one does not live in the United States, in prison, or is already covered with Medicare.
Same with COBRA, you can enroll within 60 days after losing your coverage. Some may also be eligible for the Special Enrollment Period during a qualifying event or getting married. But if you miss enrolling during the SEP after a qualifying circumstance, you must wait for the Open Enrollment Period, which takes place every year. (Check for the date of the Annual Open Enrollment Period)
The cost of ACA coverage depends on the type of the plan. You may want to call us and speak with our licensed and experienced representatives for guided ACA plan options.
Switching from COBRA to ACA is it possible?
Switching from COBRA to ACA is possible if you have already used up all of your COBRA coverage. Another qualifying event makes you eligible for SEP and during the Annual Open Enrollment Period. Outside these circumstances, you will not be allowed to switch. It is better to look into your circumstances carefully before deciding to discontinue your COBRA plan to avoid any problems with your health insurance coverage.
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