It’s a tough time for a lot of businesses right now. It’s a tougher time for a lot of people. Somewhere between government mandated shutdowns, low consumer confidence, and limited operations for a lot of businesses, the unemployment rate has skyrocketed. Whether in the form of a layoff or temporary furlough, many people have lost their jobs as a result of the economic dip. Unfortunately, with the loss of a job comes the loss of employer-sponsored insurance.
Navigating Insurance in a Pandemic and Recession: Coverage Matters
For many, this presents a challenging landscape—especially if you haven’t shopped for insurance in recent years. Insurance has changed over the past decade, and for many, this is a complete change; more than half of the population received employer-sponsored insurance in the latest Census report.
That said, losing your job and losing your insurance in the middle of a pandemic is one of the worst things that can happen—uninsured patients could expect to pay at least $500-$1,000 just to get tested for the virus, and a 10-day hospital stay could amount to a bill of at least $75,000, according to CNBC.
That said, you do have options, and depending on your circumstances, this may present even more complexity and tough decisions.
If you have lost your job, you may have been presented the option to continue receiving the same coverage you received before the unfortunate event. You may also qualify for a Special Enrollment Period, allowing you to purchase insurance on the marketplace. Add this to the option of short-term insurance coverage, and the number of choices available may feel like more of a hassle than a benefit.
These three options—COBRA, ACA Marketplace, and Short-Term Insurance—each come with their own costs, benefits, and stipulations that you need to understand before you decide. At Insurance Broker Hub, our goal is to help you choose wisely, and following our article on Short-Term Insurance, are going to help you explore whether to continue your employer-based coverage using COBRA or opt for a marketplace plan.
What is COBRA?
COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act, and gives employees in certain situations the right to pay premiums for and keep the group health insurance that they would otherwise lose after they reduce work hours, quit their jobs, or lose jobs.
In general, employees (and their spouses and dependents) who lose coverage under an employer’s health plan are entitled to continue that coverage for up to 18 months. For those with COBRA-eligible plans who have lost employment, it’s likely you’ve received paperwork informing you of your rights shortly after you were separated.
While this may sound simple, costs can quickly add up and it’s important to compare plans available to know whether it’s worth it.
The Same Coverage You Received
When you are offered COBRA, the most important thing to understand is that you’re paying to continue coverage under the exact same employer-sponsored health insurance plan you already have. Premium payment schedules and processes differ, but otherwise, you’re paying for nothing to change.
This means that you’re able to stay with the same doctors (who remain in-network) and that if you had a PPO, you’ll still have a PPO.
How Does This Compare to the Marketplace?
Comparatively, the move to a marketplace plan represents a move to a new plan, which could result in different prescription coverage, different networks of doctors, and a different type of plan. Insurers offer a wide range of plans, meaning even if you move from a Blue Cross Blue Shield plan to another Blue Cross Blue Shield Plan, everything could be different.
You’re Paying the Employer Portion Now
The drawback to this is that in addition to a 2% maintenance fee, you now are responsible for the employer contribution as well as your own. Depending on the contribution split, this could result in a shocking and significant increase in your premiums.
But You May be Eligible for Subsidies
While costs may be steep, in rare circumstances, you may receive subsidies from your former employer to help cover a portion of your costs.
A Limited Time to Enroll*
COBRA Coverage may last up to 18 months, but the time to enroll is only 60 days. The clock starts ticking on either the day you receive your COBRA election notification, or the day you would have lost coverage. The clock starts ticking the day you receive your election paperwork or the day your coverage is supposed to end.
For example, if your coverage is going to end on June 30 and your employer provides your COBRA election paperwork to you on June 25, than your COBRA election period will start on June 30. But if you aren’t given the COBRA paperwork until July 3, then your COBRA election period would start on July 3.
Knowing this, even if you wait until day 59 to enroll, the coverage is active for the previous 59 days and you owe the premiums for those 59 days.
*-This is true under most circumstances, but has been clarified in a recent letter from the DOL, IRS, and Treasury. For more information, see COVID and COBRA below.
The Marketplace Special Enrollment Period
Alternatively, if you opt to use marketplace coverage, the loss of a job triggers a Special Enrollment Period on your state’s health insurance marketplace or the individual market. This period is also limited, so if you don’t enroll during this time period, you would have to either wait for November’s Open Enrollment period or choose a short-term plan.
Pay or Lose
Another thing to know about COBRA is this—if you don’t pay, it’s gone. Any late payment on a monthly premium will result in coverage ending that day, and will only be able to be reinstated if you pay within the 30-day grace period. Therefore, if your payment is due July 1, and you are unable to pay until July 6, any claims made between those two dates will be denied.
Additionally, loss of COBRA coverage does not trigger a special enrollment period, and you will have to apply for short-term coverage or wait until open enrollment.
Special Circumstances: COVID-19 and COBRA
A recent fact sheet released by the Department of Labor, IRS, and Treasury has changed a few things about COBRA enrollment.
This Frequently Asked Questions (FAQs) document was written to help employee benefit plan participants and beneficiaries, as well as plan sponsors, and employers, impacted by the COVID-19 outbreak understand their rights and responsibilities under Title I of the Employee Retirement Income Security Act of 1974 (ERISA).
Under the final regulation, all group health plans, disability, and other employee welfare plans, and all pension plans that are subject to ERISA or the Internal Revenue Code, must disregard the “Outbreak Period” for purposes of determining certain deadlines. The “Outbreak Period” runs from March 1, 2020 until 60 days after the COVID-19 National Emergency ends (or such other date as the agencies announce). As noted by ERISA Practice Advisor:
“For example, suppose an employee terminated employment and lost health coverage on February 29, 2020. The employer would have had 14 days to provide a COBRA election notice (deadline March 14, 2020), and the employee then would have had 60 days to make an election (deadline May 13, 2020) and another 45 days to make the first premium payment (deadline June 27, 2020).
With the extension, the period from March 1, 2020, until 60 days after the National Emergency ends is disregarded. Assuming that the COBRA notice would have already been provided, this means that the employee would have until 120 days after the National Emergency ends to elect COBRA—retroactive to March 1, 2020—and another 45 days after that to make the first premium payment.”
Should You Opt for COBRA Coverage?
The decision on whether to enroll in a marketplace plan or continue coverage is one that depends on your current situation. Consider the following:
- How do the premiums compare? Remember that you will be paying both the employer contribution as well as your own, and your decision should balance the coverage you receive with the premiums you will be paying.
- Is there a different option? Another thing to ask is whether you can enroll on a spouse’s plan. This may be more affordable than COBRA and offer comparable benefits.
- Are you close to your deductible or out–of-pocket maximum? One reason to stay on COBRA coverage is the continuation of coverage. This means continuation of all deductibles and out of pocket maximums. Moving to a spouse’s coverage or enrolling on a marketplace plan represents a new plan, meaning new deductibles and OOP. Therefore, if you’re close to or beyond these limits, the additional premium may be worth it.
- Would my doctors be in network in a marketplace plan? While you may receive lower premiums, you need to look at the network of providers to ensure your doctor is in-network.
- Are my prescriptions covered under the Marketplace plan? Depending on the prescription drugs you’re taking, the costs for changing insurance could represent a change in medication or cost.
- Do I qualify for subsidies? Maybe COBRA subsidies are part of the severance package. Alternatively, if you are at 400% of the poverty line, you may qualify for marketplace subsidies.
Regardless of Your Situation, You Have Options
You do have options. Whether you are eligible to enroll as a result of lost coverage, need to apply under the emergency Qualifying Life Event, need COBRA, or are seeking short-term health coverage, it pays to have someone in your corner who knows how to help.
Shopping for insurance used to be confusing and time-consuming. But with the help of our national network of licensed brokers, it doesn’t have to be. Insurance Broker Hub has helped over 10,000 consumers find the coverage they need at a price they can afford.
Our free service gives you access to an independent network of national brokers who have the experience and expertise to design a plan around your needs and budget. Ready to get started? Simply request a no obligation health insurance quote here.