When you're leaving a job that provided you with health insurance, making a plan for continued coverage is one of the single most important things you can do. Without health insurance, a serious accident or illness could cost you hundreds of thousands of dollars in medical bills. And even getting more minor care becomes expensive without insurance-plan discounts.
One of the options likely to be available to you once you leave work is to stay on your employer's plan. You can do this because of the Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA. As long as you were covered on the last day of your employment, you have up to 60 days to opt for COBRA coverage, and can stay on your employer's plan for up to 18 months -- or up to 36 months in case of disability or a second qualifying incident.
But, while you can use COBRA coverage and stay on your employer's plan, this isn't always a good idea. You need to carefully consider the pros and cons so you can make an informed choice about what's best for you.
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The problem with COBRA coverage
The big problem with COBRA coverage is that it's often very expensive. Chances are good that your employer was subsidizing at least some of your insurance premiums while you were employed. This almost always stops when you leave work, unless you've negotiated continued employer payment of health insurance as part of a severance package.
If your employer was picking up part or all of your coverage and stops doing that, you'll suddenly be responsible for footing the entire cost of your insurance. And this can be a huge bill. When I left a job that provided 100% coverage for me and 50% coverage for my spouse, our premiums would've gone from $250 monthly to $1,000 monthly if we'd elected COBRA coverage.
Paying the very high cost of COBRA coverage may simply be unaffordable at a time when you no longer have a job.
The upsides of COBRA coverage
Of course, there are definitely benefits to COBRA coverage. First and foremost, employer-provided plans are often better than any you can buy on the private insurance marketplace.
Depending upon the quality of the plan you had at work, it may be impossible to get coverage that has as wide a network, as low a deductible, or as low an out-of-pocket limit as you had before. This was what my husband and I discovered when we started shopping for private insurance coverage.
If you keep your plan under COBRA, there also won't be an interruption in your coverage or care. You'll get the same benefits as you had before. If you've already met your deductible you won't have to start over for the year, and you won't have to worry about changing doctors.
Explore your other options
When making the decision about whether to keep COBRA, you also have to think about your other options, as any other types of insurance available to you will likely make a huge difference in your decision.
If your spouse gets coverage at his or her workplace, look into whether you could be added as a dependent. If so, your spouse's employer might subsidize some or all of your premiums. And because that coverage would be employer-provided, it might offer better policies than the individual marketplace.
You should also look into policies sold on the Obamacare exchanges. Losing your employer-provided coverage is a qualifying life event that makes you eligible to get health insurance outside of open enrollment; this means you could sign up for a policy right away. And, depending on your income, you may be eligible for subsidies that significantly reduce premium costs. The policies available to you on an Obamacare exchange may thus be much more affordable than COBRA coverage.
When you compare Obamacare policies or coverage available through your spouse's workplace, consider what the coverage is like compared to your employer-provided insurance. If you're going from a policy with no deductible to one with a $6,900 deductible, even if the premiums are lower, you might end up spending more in total if you actually need care.
Look at the big picture
As you can see, there's a lot that goes into the decision of whether COBRA coverage is the right option for your health insurance when you leave your job. Make sure to explore all your options before you decide. Also look at premiums, subsidies, deductibles, and co-pays, and at whether plans allow you to keep your doctor.
By looking at the big picture, you can find the insurance that's right for you. Remember, you have 60 days to elect COBRA, so you have a little time -- but don't wait too long to decide.
