FAQ

What Is COBRA Insurance and How Much Does It Cost? – Ramsey

Losing your job or having your work hours reduced can feel like a punch in the gut. once you get over the initial shock, you still have to live with the reality of being out of work.

One of those realities is figuring out what you’ll do with health insurance. You probably received a letter from your employer informing you that he qualifies for collect insurance. Two questions probably popped into his head as she tried to make sense of it all: what the hell is cobra insurance? do i need this?

Reading: Why is cobra insurance so expensive

You will face many important questions as you figure out your next steps, but don’t put your health insurance needs on the back burner. A medical emergency can happen at any time, so you need to figure this out now.

Before you decide if collects insurance is right for you and your family, there are a few things you should know.

do covid-related job losses qualify for cobra insurance?

First, let’s address health coverage following job losses related to the 2020 coronavirus pandemic. That’s a difficult outcome many are facing. But if it happened to you, there is some encouraging news: In response to economic problems stemming from the pandemic, President Joe Biden in March 2021 signed into law the American Bailout Plan (ARPA) Act. requires a 100% subsidy of cobra premiums from April 2021 to September 2021. 30, 2021.1 just be sure to enroll if you qualify, and read below about the timeline to opt for cobra!

even beyond the window of the harp law, you have another health insurance option if you have lost your job as a result of the problems of the pandemic. You’d also be eligible for a special enrollment period on the federal exchanges.2 You may even find a better price through a federal plan than you would normally see with cobra coverage.

what is cobra insurance?

If you’ve lost your job-based health insurance, you have two options: replace it with another plan (either in the marketplace or through a new employer) or enroll in paid health insurance. And no, cobra insurance has nothing to do with snakes, in case you were wondering.

Cobra health insurance, which grew out of the Consolidated Omnibus Budget Reconciliation Act, allows you to temporarily (usually up to 18 months) keep the same employer-based health plan you had at your old job. most employers with group health plans offer this option to employees.

The basic idea behind Cobra is to help you and your family avoid a gap in health coverage. And trust us, you don’t want to have a coverage gap!

who qualifies for cobra insurance?

There are basically three factors that determine who is eligible for cobra insurance. if you qualify, you can keep your insurance (assuming you want to keep the same health plan and benefits you got at your old job).

1. lost his work-based group health plan.

If you decided to quit your job, had your work hours reduced, or were laid off and lost health coverage, you qualify for Cobra continuation coverage. (which rules out the ability to enroll if you had previously dropped employer-based coverage). the only exception is if you were fired for committing a crime (and health insurance is the least of your problems if that’s the case).

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2. is covered by a group health plan.

If you, your spouse, and your children are covered by your workplace health plan, your entire family can participate in cobra action. but if you were the only person covered, then no one else in your family would qualify for cobra, only you.

Your spouse or children covered by the plan from your previous job will also be eligible for collect if:

  • You pass away. Although you will obviously no longer need health insurance, your family can still remain covered by Cobra.
    • You get divorced. If you and your spouse are separated and are on your health plan, you can keep the same coverage with Cobra. the same applies if you are in your health plan.
      • you switch to medicare. when you switch to medicare, your family can extend their coverage under charges.
        • your child grows up. once your child turns 26, they will be on their own, at least when it comes to health insurance! But while they shop for their own insurance plan, Cobra can help prevent a gap in coverage, if that’s what it is.
        • 3. your group health plan qualifies under charges.

          Whether you work for a large New York law firm or a small Nebraska public school, most employers that offer health care benefits are required to offer paid insurance to employees after they leave.

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          however, there are some exceptions. employers with fewer than 20 employees do not necessarily have to offer charges; the rule for small businesses varies by state through what are known as mini-cobra plans.3 and if your employer is closing or canceling your health insurance for everyone in the business, then no continuation coverage can be offered .

          how much does health insurance charge?

          It’s easy to forget how much your work-based health insurance really costs, especially since your employer helped foot part of the bill. all that changes when you leave, go part-time or get laid off. And if there is a place where you feel the bite of the cobra, it is in your wallet!

          Your monthly cobra premiums (or payments) will be equal to the full cost of your employer-sponsored health insurance premium, plus a 2% administrative fee. If you’ve had insurance through your employer for a while, the price to continue that coverage on your own will hurt.

          In 2020, the average annual premium cost for employer-sponsored health insurance was $7,470 for individual coverage and $21,342 for family coverage.4 But employers covered 83% of the costs for individuals and 74% for families on average.5

          with cobra insurance, you take care of everything. that means you could be paying average monthly premiums of $623 to continue your individual coverage or $1,778 for family coverage, maybe more!

          We know those numbers sound high (and they are). but there is something even more expensive: having to pay the bill for a medical event without any type of insurance. trust us, taking the temporary hit of the premiums you collect is far better than facing potential medical bankruptcy. it is by far the lesser of two evils.

          what is my timeline to choose whether to enroll in the insurance charges?

          You have some time to think about cobra, but not much.

          The clock starts ticking when you lose coverage or hear from your employer. when that happens, you qualify for a special enrollment period and have 60 days to choose cobra continuation coverage or a marketplace plan. if you say “no thanks!” To Cobra, you’ll have to choose a plan from the Marketplace.6 (By the way, if you drop Cobra coverage but change your mind, you can still go back and choose coverage as long as you’re within the 60-day window.)

          If you miss that window and don’t enroll in Cobra or a Marketplace health plan, you’re putting yourself in a dangerous position.

          First, once the first 60 days have passed, you will not be able to sign up for cobra. and second, if you didn’t sign up for any health insurance plan during that time, you may have to go uninsured until the next open enrollment period. that’s a big risk to take. What if you or someone in your family has a medical emergency and you don’t have insurance?

          It doesn’t matter how young, healthy or rich you are. if you’re alive and breathing (and since you’re reading this, that means you are), then you need health insurance. Without exceptions! medical bills are the number one cause of bankruptcies in the united states7 don’t risk your health or your finances. it’s just not worth it.

          How long does cobra continuation coverage last?

          If you like your work-based health plan, you can keep it, well, at least for a while.

          again, the cobra continuation coverage is designed to be a temporary extension of the health insurance you had at your old job; the keyword here is temporary. In most cases, Cobra coverage lasts 18 months from the time you decide to enroll.

          Under special circumstances, you may be able to extend cobra coverage to 29 or 36 months for yourself and your dependents.

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          But be careful: if you’re late on that first payment, you’ll lose your right to collect coverage and you won’t be able to get it back. your first payment due date is defined as 45 days after you elect coverage. if you are late on a monthly payment after that, your coverage will end on that day. however, if you make your payment within the 30-day grace period, your cobra coverage may be reinstated.

          how do i decide between cobra and other health insurance options?

          Whether you’re trying to choose between health insurance plans or what to have for dinner tonight, it’s always good to have plenty of options. and as we said before, you have other options besides cobra.

          If you’re still looking for a new job, decide to start your own business, or need insurance to bridge the gap until you start receiving your health care benefits at your new job, you’ll probably find that buying health insurance from the Marketplace is less expensive than charged.

          So how do you decide which health plan is best for you? here are some things to think about:

          1. know your medical needs.

          everyone is different. Your and your family’s medical needs probably won’t be the same as your next door neighbor’s, so it’s important to know what you want and find a health insurance plan that makes sense for you.

          For example, if you have prescription drugs, you should check to see if they will be covered by Cobra or a Marketplace insurance plan. take a look at the general coverage and provider network as well.

          2. understand the differences between the plans.

          Things can get confusing quickly as you try to figure out all the health insurance plans out there. you need to understand what you’re getting and the differences as you look at each option.

          for example, your doctor may have been in the network through the preferred provider organization (ppo) plan you had at work, but may not be in the network of the preferred provider organization (ppo) plan. health maintenance (hmo) you are looking for in the market . That means it will cost more to see your doctor if you choose the HMO. In that case, you need to do some soul searching and ask yourself how much you really like your doctor.

          These are the kind of details you need to think about when deciding whether to choose cobra or not. Different plans have different coverage options, so make sure you know what you’re signing up for!

          3. weigh the costs.

          Cobra insurance is often more expensive than marketplace insurance, in part because there is no government financial assistance available to help you pay those premiums you collect.

          If you choose a Marketplace plan, you can consult with an independent broker who can help you compare different health plans to see if you qualify for a premium tax credit. If you qualify for the tax credit, it can help lower your monthly payments.8 And who doesn’t want lower payments?

          More Americans are turning to health savings accounts (hsas) and high deductible health plans (hdhps), which have lower average premiums than other types of health plans.9 using an hsa can be a great way to save money on health insurance costs, if it’s available to you. And if you already have an HSA, when do you lose your job? keep in mind that money in an hsa is eligible to cover cobra premiums.10 be sure to look at all the options available for your situation.

          work with an independent agent

          When it comes to choosing the right insurance coverage for you and your family, it helps to have many options to choose from. partnering with an independent insurance professional can give you more options to consider. You can also get help reviewing and comparing all of your options, including Cobra, so you can make a confident decision about your health insurance.

          If you’re leaving an employer and your insurance needs are changing, it’s important to connect with an independent agent so they can review all of your insurance and make sure you’re covered for life’s next chapter. Our Supported Local Providers (ELP) program makes it simple and easy to find quality insurance professionals in your area. find an independent agent today!

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