Right out of college, I had a job at a small advertising company — and I hated it. It was a painfully toxic work environment, and I cried every morning before getting out of the car.
Everyone told me I should just quit, but I couldn’t; I have several medical conditions that require regular appointments with doctors and multiple prescriptions. Without health insurance, it would have cost me thousands each month out of pocket.
I finally reached my breaking point one day and I stopped by human resources to see if there was anything I could do. They told me about the Consolidated Omnibus Budget Reconciliation Act (COBRA), which would allow me to get health coverage without staying with the company. (The Affordable Care Act hadn’t yet passed; yes, I am that old).
It was expensive but well worth it to me for the freedom it gave me to quit that awful job. COBRA bridged the gap until I could find a new employer.
If you’ve had a change in employment or your family situation, continue reading to find out what COBRA insurance is and how it works.
What is COBRA insurance?
COBRA is a federal law that gives workers and their families a way to keep their current group health coverage for a certain period. According to the U.S. Department of Labor, your employer generally has to have at least 20 employees for you to be eligible for COBRA. Depending on your situation, you could be eligible for COBRA for 18 to 36 months.
If you’re part of an employer-sponsored health insurance plan, you might qualify for COBRA in the following situations:
- You quit, are laid off, or are fired for any reason other than gross misconduct
- Your employer reduces your working hours
- Your spouse is the covered employee and you divorce
- The covered employee passes away
COBRA usually doesn’t apply to plans offered through employers such as the federal government or churches.
How does COBRA work?
COBRA allows you to continue to have the same health insurance you’re used to, but there’s a catch: You’re responsible for 100 percent of the premium.
In a survey, the Kaiser Family Foundation found that the average annual premium for an individual’s employer-sponsored health plan is $6,690. Meanwhile, individual employees are responsible for about 18 percent of the premium, on average, and their employers cover the rest, according to data from the Bureau of Labor Statistics.
If your plan cost $6,690 a year, that means you pay $1,204 — or just $100.35 a month — for your health insurance when you’re employed. Your employer pays the remaining $5,486.
With COBRA, you can keep your health coverage after leaving your job, but you’ll have to pay the full premium yourself. Instead of paying just $100 a month, your monthly bill would jump to $558 a month to keep your plan. You would also still be responsible for the same co-pay and deductible expenses.
The increase in premiums can be a shock, and if your family is also covered on your health plan, you could end up paying thousands each month to maintain your coverage.
You might be tempted to skip paying that bill to save money, but forgoing health insurance is a big gamble. A single illness or accident can cost you tens of thousands of dollars.
How to sign up for COBRA
If you’re eligible for COBRA, your current insurer will send you a notice in the mail detailing:
- What COBRA insurance is
- Your rights
- What your premiums will cost
- The deadline to sign up
- How long you can keep your coverage
Typically, you’ll have at least 60 days to decide whether to enroll.
You must complete the forms sent to you within that notice and mail them back to the insurer. You are not required to send a payment along with your election form, but you will have to make a payment within 45 days.
It can take several weeks after you leave your employer to receive the notice and to enroll. However, don’t panic about medical expenses in the meantime. COBRA benefits are retroactive, so if you sign up for COBRA, you can submit your receipts for your doctor appointments or prescriptions for reimbursement.
If you initially decide you don’t want COBRA coverage but then change your mind, you can still sign up as long as it’s still within your notice period. However, if you don’t enroll within that period, you will be ineligible for COBRA insurance and will have to find your own coverage.
3 COBRA alternatives
COBRA coverage can be cost-prohibitive if you’re on a tight budget, but it’s still smart to get some kind of health coverage. If you can’t afford your entire insurance premium, consider one of these three COBRA insurance alternatives instead:
- Sign up for a plan on HealthCare.gov: The Affordable Care Act allows you to sign up for health insurance on your own, without an employer-sponsored plan. The average individual premium through the health insurance marketplace is $393, but that amount doesn’t include subsidies. Depending on your income and family size, you could receive a subsidy that significantly reduces your premium cost.
- Get a part-time job: If you’re still job-searching, you could get a part-time job with an employer who offers health insurance. There are several companies that provide benefits to part-time employees.
- Get a catastrophic-only plan: To protect yourself in the case of serious emergencies, consider enrolling in a catastrophic-only health plan. Insurance plans must meet certain guidelines to qualify under the Affordable Care Act; catastrophic plans don’t always qualify. That means you might owe a penalty, but it could still be cheaper than a regular plan.
Get healthcare coverage
If you or your spouse have lost your job, staying covered under health insurance is a big deal. By understanding what COBRA insurance is and how much it costs, you can ensure you’re prepared to pay the premium or find an alternative elsewhere.
If you need health insurance but don’t know where to start, check out this guide to choosing a plan on HealthCare.gov.
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