COBRA health insurance: It can be both loved and hated. On the plus side, it’s guaranteed health insurance coverage for those scary times when you really need it, like if you’ve lost your job, get cut back to part time and no longer qualify for benefits, you get divorced or lose your spouse and, therefore, your insurance coverage.
On the negative side, COBRA costs an arm and a leg. In fact, it can be some of the most expensive individual health coverage out there.
When considering COBRA health insurance, i’s natural to feel stuck between a rock and a hard place. Do you stay and pay for a plan you are familiar with or hunt for something better and risk losing some good coverage? Let’s review how COBRA works.
What is COBRA?
COBRA is not a specific health plan. Rather, it is the right to keep your existing group health plan when a “qualifying event” (more on that later) means you are no longer eligible for coverage. The only difference between COBRA and your existing coverage is how you’ll be shouldering the entire cost.
How Does COBRA work?
Once you’re employer is aware of a change in you or your dependents’ health insurance eligibility (called a “qualifying event”), they’ll notify you that you’re eligible for COBRA. It’s then up to you to return the forms to elect COBRA. Then, you’ll be billed the full cost of the plan—your share plus the share your employer used to pay—plus a small administrative fee.
This fee cannot exceed 2% by federal law. You’ll probably receive a new health insurance card, but your plan will remain the same as it was before. Basically, under COBRA, you get whatever active employees get, except you pay for it out of pocket. So if your employer changes the plan for everyone, it changes for you as well. If there is an open enrollment period to switch plans, you can also switch.
Who is COBRA good for?
COBRA could be a good choice for you if:
- You have a lot of pre-existing conditions
- You go to several specialists who are covered under your current plan
- Your plan has some unique features or good coverage for a special service that you need
- You expect to get more affordable coverage from another source soon.
Of course, you should always look into your options and compare costs but generally, COBRA tends to work out well for people in these situations.
Can you be denied other coverage if you don’t elect COBRA?
Yes, you can. Unfortunately, you currently do not have any guaranteed rights to obtain coverage from another company simply because you are eligible for COBRA.
What about Vision and Dental?
You might be able to choose to elect one or both of these separately from your medical plan, or only your medical plan, depending on your employer. Check into this to tailor your health coverage to only what you need.
Finally, if you decide to elect COBRA, watch your deadlines. There are very specific windows of time for when your employer must inform you of your right to COBRA, when you can choose to take it, and when you must pay the premium.
Tomer Shoval is the CEO and Co-Founder of Simplee, a free online personal health care expense management tool. Connect with him on twitter, facebook or email.