When Dale, 45, quit his job to take another position, he knew there was a three-month waiting period before he was eligible to enroll in his new employer’s health plan. Around the same time, her friend Debra, 62, was laid off from her job and would soon lose coverage for herself and her spouse.
Fortunately, Dale and Debra can stay on their employer-sponsored health insurance under Cobra, also known as the Consolidated Omnibus Reconciliation Act. Cobra is a federal law passed three decades ago to provide families with an insurance safety net between jobs. It’s available if you’re already enrolled in an employer-sponsored medical, dental, or vision plan, and your business has 20 or more employees. your spouse/partner and dependents may also be included in your cobra coverage.
Here are 5 questions to ask before you sign up for cobra benefits:
1. what is my deadline to sign up for cobra?
Your employer has 44 days from your last day of work or last day of insurance coverage (whichever is later) to submit cobra information. but it’s a good idea to check with your benefits administrator a couple of weeks after you leave.
You will have 60 days to enroll in Cobra, or another health plan, after your benefits end. but keep in mind that delaying enrollment will not save you money. charges is always retroactive to the day after your previous coverage ended, and you must also pay your premiums during that period. One of the benefits of joining right away is that you can continue to see doctors and fill prescriptions without breaking coverage.
cobra allows you to keep exactly the same benefits as before. no changes can be made to your plan at this time. however, if you are still on cobra during the next open enrollment period, you can choose another plan that your former employer offers to employees. the new plan will take effect on January 1.
2. How much does it cost?
Most companies pay most of their employees’ health plan premiums, with the rest deducted from their paycheck. On average, workers contribute 20% of the premium for individual coverage and 30% for family coverage. Under cobra, you will be responsible for 100% of your premium, so your monthly cobra payment can be 5 times your payroll deduction.
Although it may seem like a lot of money, cobra premiums are often less than what you would pay on the open market, because you still benefit from your company’s group discount.
if you have a health savings account (hsa), you can pay your collect premiums with those funds. (Insurance premiums are typically not an HSA-eligible medical expense.)
During the next open enrollment period, you can choose to switch to a less expensive plan. High-deductible health plan (HDHP) premiums, for example, are considerably lower than other types of plans for both individual and family coverage.
3. How long will my coverage last?
although cobra is temporary, you will have time to find another plan. Federal coverage lasts 18 months, beginning when your previous benefits end. some states extend medical coverage (but may not include dental or vision) to 36 months. check with your benefits administrator to find out if your state extends cobra benefits.
Some benefits have a lifetime limit, but that is not the case with Cobra. each time you enroll, you are entitled to the same benefits for the same period of time.
4. what are the alternatives to charge when i leave my job?
cobra isn’t your only option when you lose your employer-sponsored plan. Depending on your situation, you may qualify for other health benefits:
- enroll in your spouse/partner’s employer-sponsored plan. leaving your job triggers a special enrollment period that allows you to join your spouse/partner’s plan. Even if your spouse is not enrolled in your employer’s plan, your job loss allows both of you to enroll outside of the regular 30-day open enrollment period. Find out how qualifying life events like getting married or having a baby affect your health coverage.
- choose a plan through the health insurance marketplace at healthcare.gov. You don’t need to wait until open enrollment in the fall if you have a qualifying life event, like leaving a job. You have 60 days to choose a plan, and your benefits will start the first day of the month after you lose your insurance.
- enroll in a business/professional group plan. You may be able to find lower premium plans through national organizations that offer self-employment benefits, such as the National Association of the Self-Employed ($120/year membership fee; nase.org) or the freelancers union (free membership; freelancersunion.org). proof of self-employment status is not required.
- low- and moderate-income families may be eligible for the Children’s Health Insurance Program (CHIP). if you earn too much to qualify for medicaid, you may be able to get low-cost coverage for your children through chip, which is jointly funded by the states and the federal government. You can find more information at healthcare.gov.
If you’re 65 or older, learn more about health insurance options.
5. What happens when my cobra coverage runs out?
If you haven’t found a new job with benefits when your cobra expires, you’ll need to choose from the alternatives listed above. Be sure to shop around early to avoid any gaps in coverage.
by asking the right questions about cobra benefits, dale and debra can now choose the best health care options for themselves. It will give them one less thing to worry about so they can focus on the life changes ahead.
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