If I asked, “what is COBRA?” how would you answer? Hint: the answer is not snake or car… not in this context, anyway. In the world of health insurance, COBRA stands for Consolidated Omnibus Budget Reconciliation Act. If that means absolutely nothing to you, I promise to explain it in a way that makes much more sense.

You’ve probably actually heard of it before, but maybe it never applied to you, or you just didn’t have a desire to learn what it was. The idea is pretty simple, though- COBRA is a federal law that may temporarily let you keep your group health insurance if your coverage ends because of certain specific events, such as job loss for reasons other than gross misconduct.1, 2 This is definitely good news for some people, but there may be a downfall, which is the cost of COBRA.

If you’re interested in learning more about COBRA, we’ve compiled some of the most commonly asked questions and their answers. These should help give you a better idea of how COBRA works and how it might apply to you.

“I’ve heard COBRA is expensive. Why does it cost more than what I used to pay through my job?”
Typically, when you have employer-sponsored health insurance, your employer pays a portion of your premium. However, when you opt for COBRA, you may have to pay for it all. This can include the portion you previously paid, the portion your employer paid, and an administrative fee up to 2%.1, 3 For some people, the convenience of keeping the same plan outweighs the price tag. For others, it’s not worth it, and in come Marketplace plans to the rescue.

“I don’t want COBRA, I’d like to select another plan…”
If you experience a qualifying life event, like losing your job-based coverage, you will trigger a Special Enrollment Period, which will allow you to enroll in a Marketplace plan if you don’t want to continue your group coverage through COBRA.1, 2, 3 You can do this at any time of the year when a qualifying life event happens, as long as you enroll within 60 days following the event.2

“I kept my group coverage with COBRA, but now I don’t want it. Can I enroll in a Marketplace plan instead?”
If you decide to continue your group health insurance with COBRA, but then decide you would like to find a Marketplace plan instead, this can only be done during the Open Enrollment Period. Otherwise, you’ll need to wait until your COBRA is running out until you can enroll in a Marketplace plan.2

“I have COBRA, but I want to end it. If I can’t get a Marketplace plan, what can I get?”
If you want to end your COBRA coverage outside of Open Enrollment, you will not be able to enroll in a Marketplace plan, but could find other temporary plans until the next Open Enrollment Period. This might include plans we’ve mentioned in other articles, such as short-term medical insurance and/or supplemental plans for accidents and critical illnesses.

“If it’s so expensive, why would someone choose COBRA over a Marketplace plan?”
There may be a few reasons why it would be cost-effective to choose to continue your group coverage, even if you’re paying full price:
If you have already met your deductible (or are close to doing so) and you need to have any pricey services or procedures done. Depending on your plan, having these done when you’ve met your deductible could save you money
If you have the money to pay for the plan and you just like the coverage you have. For some people, sticking with what they have and what they know is worth the cost

“Why would someone choose a Marketplace plan instead?”
A Marketplace plan could have a lower premium
The Marketplace will likely provide several plan and coverage options- this gives someone the flexibility to choose a plan that works best for their medical coverage needs as well as their financial needs
They really have no emotional attachment to their group health plan and therefore are willing to shop around for a plan that still gives them solid coverage

This article is meant to provide a brief rundown of COBRA and how it works. Benefits can vary by employers and plans, so always double check with them before continuing or waiving COBRA coverage.

Citations

  1. COBRA continuation health coverage. (n.d.). Retrieved April 20, 2016 from United States
    Department of Labor website http://www.dol.gov/ebsa/faqs/faq_compliance_cobra.html
  2. COBRA coverage and the Marketplace. (n.d.). Retrieved April 20, 2016 from HealthCare.gov website https://www.healthcare.gov/unemployed/cobra-coverage/
  3. COBRA: Keeping health insurance after leaving your job. (n.d.). Retrieved April 21, 2016 from
    American Cancer Society website http://www.cancer.org/treatment/findingandpayingfortreatment/understandinghealthinsura
    nce/what-is-cobra