Due to the recent presidential election, parts of the Affordable Care Act described below may change. The current rules will likely stay in place through 2017. We’ll provide updates as they occur.
When you leave a job, a key decision you need to make is what to do about health insurance when your current coverage ends. If you’re under age 65 and not yet eligible for Medicare, then your two major options are either COBRA, or policies on health insurance exchanges set up under the Affordable Care Act (ACA).
Consider the following factors to help you decide.
A big difference is cost. If you continue your existing coverage under COBRA, you pay 100% of the cost of coverage, plus an additional 2% in administrative costs. COBRA coverage is not eligible for any sort of subsidies to reduce the cost.
Policies sold through health insurance marketplaces generally cost less, especially some of the more “stripped down” policies. Also, as discussed in a previous post, low- and middle-income households may be eligible for a subsidy to further reduce the cost. The amount is based on household size and income. A family of four with less than $97,200 of household income may qualify for a significant subsidy.
One benefit of COBRA is that you keep the same coverage. You know that your doctor is already in-network, so you won’t have to change care providers. And, your deductibles and copays remain the same.
COBRA allows former employees to continue comprehensive medical insurance, dental, and vision plans. COBRA does not apply to life insurance or disability benefits.
ACA policies are available to anyone without health insurance, but they may have a different, and limited, network of care providers. This may force you to find a policy that already has your existing doctor in-network, or use a different care provider. Also, lower cost plans likely come with higher deductibles, copays and other types of costs.
Duration of Benefits
When you sign up for COBRA, you can continue that coverage for 18 to 36 months, depending on why you left the job. If you don’t have new group coverage by the end of that time – usually from a new employer – then you have to sign up for a new plan. The new plan will likely be an ACA policy sold in the health insurance exchanges.
The ACA policies continue until you’re covered under a new group plan, as long as you continue to pay the premiums.
Ability to Change Your Mind
Upon losing your group coverage, you have 60 days to enroll for coverage under COBRA. If you don’t sign up during that time window, you won’t be able to sign up for COBRA.
ACA policies have a similar window. If you don’t sign up during that time period, then you have to wait for the next open enrollment period (usually November or December) to sign up.
If you enroll in COBRA and want to change to an ACA plan, you have to wait until the next open enrollment. If you enroll in an ACA plan, you can’t change your mind and later enroll in COBRA.
There are several factors to consider when making a choice after losing group coverage. COBRA is likely more expensive, but it allows you to continue your existing coverage. An ACA policy is likely to cost less – possibly much less if you qualify for any subsidies. However, your network of available care providers may be limited. It’s important to consider the pros and cons when deciding which option to take.
Due to the recent presidential election, some of the factors described here may change. We’ll work with clients to help them make adjustments if any changes occur.
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After college, Chris moved to South Korea where he worked for the army as a financial counselor. He helped everyone from 18-year-old service members getting their first real paychecks, to those approaching retirement, and saw the stress caused by spending too much money early in life, as well as the stress of sacrificing too much earlier on and missing out on the opportunity to really live fully. He became a financial advisor to help people find clarity in reaching goals and to work with them to find balance between planning for tomorrow and living fully today.
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