COBRA vs. Short Term Health Insurance
While it is
always important to enroll in a health insurance plan that suits your expected
healthcare needs, it is especially important to make sure you have coverage for
an unexpected health challenge in the new normal. If you suffer a job loss and need
health care coverage you should begin stabilizing by comparing the pros and
cons of COBRA and short-term health insurance.
COBRA stands
for the Consolidated Omnibus Budget Reconciliation Act. It is not a specific
insurance plan but a law that allows you to continue your employer-sponsored
health insurance if you left voluntarily or were laid off. However, if you were
fired for gross misconduct you cannot qualify for health insurance under COBRA.
COBRA based health insurance is available only if your employer has a minimum
of 20 full-time employees. COBRA can be maintained up to 18 months but longer
under certain circumstances. You may also qualify for COBRA based health
insurance for other scenarios, such as you received health insurance through
your spouse's employer and you are now divorced or widowed, or you received
health insurance through your parent's employer and they are now eligible for
Medicare and will not continue employer-provided health insurance.
You will
receive the notice of your COBRA eligibility within 14 days after the termination
of employer health insurance coverage. You will have 60 days to elect to
continue the coverage. The coverage will be retroactively effective from the
date when you would have otherwise lost coverage. Once you submit the paperwork
it might take three to four weeks for you to be signed up.
If you elect
COBRA based health insurance coverage you will continue the same health
insurance that you had when you were employed. You cannot alter the plan, for
example by changing from a PPO to an HMO. If you were the only household member
insured under your employer's health insurance, you cannot add your spouse or
children. However, if your spouse or kids were insured under your employer's health
insurance, you can choose to continue their coverage. You can also keep the
coverage for some family members and choose another option for other family
members. But once you drop COBRA you are not eligible to enroll again.
If you have
chronic medical conditions, are pregnant, or need ongoing medical treatment COBRA
based health insurance may be your best option.
A drawback
is COBRA health insurance can be expensive. When you were employed, your
employer might have paid the majority of your health insurance premium. Under
COBRA, you pay 100% of the premium and an additional 2% administration fee. But
COBRA doesn't have to take a bite out of your wallet, here's how.
Short term
health insurance is an excellent alternative to COBRA based health insurance
because you can sign up right away with coverage starting as early as the next
day. Short term health insurance cost is generally low and there are many short
term medical plans available in the market.
A drawback
is that short term medical insurance plans do not cover pre-existing
conditions, maternity, mental health and other circumstances. Short term health
insurance is medically underwritten so depending on your circumstances you may
be declined for coverage. Additionally, short term medical insurance is not ACA
(Affordable Care Act) compliant and does not provide minimum essential coverage
(MEC).
If you are
young, healthy, and if you feel that coverage provided by short term medical
insurance is sufficient, you can save some money in your insurance premiums. And
if only a few of your family members have medical conditions that need ongoing
treatment, you can continue COBRA based health insurance for them and choose
short term medical insurance for the rest of your family members.
To help you analyze
what might be right for your health insurance needs in a time of transition,
call your oXYGen Financial Private CFO, or visit our website to contact us. We'd be happy to help you analyze your options carefully.
