If you need health insurance for a short time after a job loss, you should begin by comparing the pros and cons of COBRA insurance and short term health insurance.
No, COBRA is not a snake. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. In other words, COBRA is not a specific insurance plan but a law that allows you to continue your employer-sponsored health insurance in case you left voluntarily or were laid off. If you were fired for gross misconduct, however, you can't 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 health insurance can be maintained up to 18 months and longer under some circumstances.
After the termination of employer health insurance coverage, you will receive the notice of your COBRA eligibility within 14 days. 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.
COBRA health insurance can be expensive. When you were employed, your employer paid the majority of your health insurance premium. However, under COBRA health insurance, you pay 100% of the premium yourself (employer's + employee's portion) and an additional 2% administration fee.
If you elect COBRA health coverage, you will continue the same health insurance that you had when you were employed. You can't alter the plan by, for example, changing from PPO to HMO. If you were the only household member insured under your employer's health insurance, you can't add your spouse or children under COBRA. 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.
Once you drop COBRA health insurance, you are not eligible to enroll again.
Although COBRA based health insurance is quite expensive, it is the best option if you have chronic medical conditions, are pregnant or need ongoing medical treatment.
You may qualify for COBRA based health insurance in other scenarios:
- You received health insurance through your spouse's employer, and you are now divorced or widowed.
- You received health insurance through your parents' employer, and they are now eligible for Medicare and will not continue employer-provided health insurance.
Short Term Health Insurance
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. Temporary health insurance cost is low. There are many short term medical insruance plans available in the market.
However, short term medical insurance plans don't cover pre-existing conditions, maternity, mental health and many other circumstances. Short term health insurance is medically underwritten; depending on the screening questions, you may be declined for coverage.
But if you are young and healthy, and if you feel that the coverage provided by short term health insurance is sufficient, you can save some money in insurance premiums.
Temporary health insurance is not ACA compliant and does not provide minimum essential coverage (MEC). Having short term health insurance is not considered a valid coverage for avoiding the ACA tax penalty either.
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 temporary medical insurance for the rest of your family members.
Follow these essential tips on how to save money on short term health insurance.
Analyze your options carefully to decide if you would benefit from continuing employer-based health insurance through COBRA or if short term health insurance is suitable for you.