What You Need to Know About Enrolling in COBRA Insurance

What is COBRA insurance

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.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal Loans: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.29% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 1, 2017 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.29% APR assumes current 1-month LIBOR rate of 1.34% plus 4.20% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2017, the one-month LIBOR rate is 1.23%. Variable interest rates range from 6.02% – 15.97% (6.02% – 15.97% APR) and will fluctuate over the term of your loan with changes in the LIBOR rate, and will vary based on applicable terms and presence of a co-applicant. Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with Citizens Bank at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, Citizens Bank checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000Visit Upstart
5.29% - 14.24%1$5,000 - $100,000Visit SoFi
8.00% - 25.00%$5,000 - $35,000Visit Payoff
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.25% - 14.24%$2,000 - $50,000Visit Earnest
Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.