Losing your job can be frightening. Leaving your job to start your own business can be exhilarating. In either case, your company health insurance plan ends on the last day of your employment. Whether you have time to plan for your loss in coverage or are suddenly scrambling to make new arrangements, it’s good to know you have options that won’t leave you in the lurch.
The Consolidated Omnibus Budget Reconciliation Act (the official name for COBRA) was passed by Congress and signed by President Ronald Reagan in 1985. The act mandates that some employees who lose employer healthcare coverage may elect to stay on their former employer’s health insurance plan for up to 18 months following the end of their employment. In the case of divorce from the former employee or death of the former employee, the spouse’s coverage may continue for up to 36 months.
COBRA is a great option for individuals who have already placed a large portion of money towards their yearly deductible, and foresee additional medical services or prescription drug costs in the future. COBRA coverage picks up right where the employer policy left off. For example, if you have a $5,000 deductible and have already had $5,125 in claims placed against your deductible, your out of pocket costs for any additional medical services for the rest of the year will be greatly reduced in cost since your health insurance company will most likely pick up much of the tab. If you lose your job and elect to go with COBRA coverage, your re-instated coverage starts back up with $5,125 already placed against your deductible level.
Once you decide you would like to continue with your former employer’s health insurance coverage through COBRA and complete the appropriate paperwork, the healthcare policy is re-instated. It does take several weeks for your policy to be re-activated, so any medical services that are needed during the gap of when your policy was terminated and then re-instated must be paid out of your own pocket. You can, however, file a claim for reimbursement once your health insurance plan is re-activated. The sting? Your former employer will no longer contribute to the healthcare plan costs, and you must pay 100% of the monthly premium for coverage. Because of this, COBRA can be an expensive route to take.
If you have not had many claims against your employer’s health insurance plan, it might be more affordable for you to forego COBRA coverage and look at an Obamacare health insurance plan. Since you have lost health insurance coverage from your employer, it is considered a “qualifying life event,” meaning that your special circumstance allows you to apply for health insurance outside of the regular open enrollment period. You have 60 days from your last day of employment to enroll in a marketplace plan. You might also qualify for an Obamacare tax subsidy to help pay for your health insurance costs through your state exchange or the federal marketplace.
If you have never shopped for a health insurance plan on your own, there are several things to consider before you buy a healthcare plan. Most individuals have many plans to choose from, and figuring out which is the best option can be stressful. Here are the top three items to review before you buy:
Understand what your out of pocket expenses will be.
How much do you spend on medical services every year? Are you a light user of healthcare or do you see a physician several times a year and experience at least one emergency room visit or hospital stay? What about the members of your family? Do you spend a lot of time in urgent care with your children? Add up your medical expenses from the previous year. This will give you a good baseline to determine your deductible.
Don’t forget prescription drugs.
Prescription drugs will many times have a separate deductible. If you take several medications, make sure you are comfortable with the deductible amount – and add it to your out of pocket expense list in case you forgot.
Verify the network suits your needs.
If you love your doctor or see multiple specialists, you want to make sure all of them are in-network. Networks vary by heath insurance plan, so it’s important to verify with your health insurance company of choice that the plan network will give you access to your doctor and local urgent care facilities and hospitals.
Once you have a good understanding of these three components, you can begin shopping for a plan. If you are healthy and only use preventive services, you might be able to save costs and apply for a low cost, high deductible plan. Just make sure you have $5,000-$12,000 in the bank that can cover your deductible should an accident or critical illness arise unexpectedly. If you use medical services regularly, you might want to consider a higher cost, lower deductible plan. It can be less expensive to spend a little more each month for a healthcare plan if you know you will be using care regularly. Your math exercise from earlier will help you make this determination to protect your wallet and find the right health insurance plan.
Once you have a health insurance quote for a COBRA plan, run a quick and easy search on HealthCare.com to see what health insurance plans you qualify for you in your area or call 877-626-1943 to speak with a health insurance agent about your options.