By Lee Sherman
What is COBRA?
If you’ve recently lost your job due to the COVID-19 pandemic, you may be wondering what will happen to your healthcare. Fortunately, as a result of the Consolidated Omnibus Budget Reconciliation Act (COBRA), you are most likely entitled to continue your existing employer sponsored health insurance coverage for an extended period of time. You are eligible for COBRA if any of the following has occurred:
- You are no longer eligible for coverage due to voluntary or involuntary termination or a reduction of hours as a result of resignation, discharge, layoff, strike or lockout, medical leave, or slowdown in business operations (i.e.: a pandemic that forces businesses to retrench).
- You are the divorced or widowed spouse of an employee receiving benefits.
- You are the dependent child of an employee receiving benefits who has reached the age where you are no longer covered.
In most cases, you are allowed to extend your health insurance through COBRA for 18 months. Depending on your individual circumstances, you may be able to extend this coverage even longer. Continuing your existing coverage for as long as possible makes financial sense because your employee plan is based on negotiated rates that are far less than you’d typically pay as an individual.
Be aware that, while COBRA will include the exact same coverage you had, you may be in for a few surprises. The main difference is that your premiums (which came out of your paycheck so you may not have noticed how much you were paying) will now be your direct responsibility and you might be shocked to discover how much it costs.
How do COBRA and the ACA compare?
The Affordable Care Act (ACA), most commonly referred to as Obamacare, because it took effect during the Obama administration in 2013, is there to ensure that most Americans will have access to affordable healthcare regardless of their employment status. The ACA provides an exchange that exists outside of the plans offered by employers where individuals can purchase health insurance at negotiated rates. The main advantage to the ACA is that you can’t be denied health insurance due to a pre-existing condition.
When you lose your job (or other qualifying event) you normally have 60 days to enroll in either your state’s ACA health insurance exchange or an ACA-compliant plan offered outside the exchange. Due to COVID-19 (which has been designated a national emergency), there have been extensions to the COBRA election period but, while this gives you extra time to elect COBRA, bear in mind that payments are retroactive back to the time that your employer sponsored coverage ended.
If you qualify for ACA subsidies, ACA insurance can be more affordable than a comparable COBRA plan. However, if you’re not eligible, or if you’ve already used up your deductible before you leave your job, COBRA may make more sense. While there’s something to be said for maintaining continuity in your healthcare (access to the same doctors, hospitals, and pharmacies), rates vary so widely that it pays to shop around, especially at a time when you need the most affordable care you can get.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.