Quitting Your Job? Be Aware Of COBRA
According to eHealth almost 50% of Americans receive subsidized group health insurance through their employer. Given the phenomenally complex health insurance marketplace one has to navigate these days, not to mention the cost, that’s a huge benefit. But what happens if you want to change employers? Thanks to the Consolidated Omnibus Budget Reconciliation Act (also known as COBRA) passed by the federal government in 1985, you have the option of keeping the same group coverage after leaving the company. But there is a catch.
Ordinarily when you purchase health insurance it’s for a one-year period. You’re not allowed to make a change until the open enrollment period each autumn. There are, however, numerous qualifying events under which you are permitted to change insurers or policies. Leaving a company is one of them. When that occurs you have several choices: you can switch to your new company’s group health insurance, switch to an Affordable Care Act (ACA) or private plan, or keep your current group policy via COBRA. And you have 60 days after termination to make your choice without becoming potentially subject to underwriting and extra cost or possibly even denial due to a pre-existing medical condition.
If you make the COBRA choice it means you will continue with the identical medical coverage, deductibles, copays, etc. under the employer’s group plan for an additional 18 months after leaving the company. Even better, certain states such as California will extend the benefit period by an additional 18 months for a total of 36 months. Be aware though that COBRA does not apply to health plans sponsored by the federal government or by religious organizations.
What about the cost? That’s where COBRA can become problematic. As expensive as your group health insurance premiums may have seemed to you when you were an employee, they were not likely even close to the actual cost thanks to company subsidies. According to the Kaiser Family Foundation 2022 Employer Health Benefits Survey, the average annual premium for all types of group healthcare insurance last year was $7,911 for single coverage. But employees only had to pay on average $1,327 of that amount, or 17%. The company covered the remaining $6,584. For family coverage, employers paid on average $16,357, or 73% of the actual $22,463 premium cost. By choosing COBRA you will get the same coverage as you received before but you will have to shoulder the entire cost.
Is COBRA worth it? If you’re changing jobs your new company’s group health plan will likely be a better choice than COBRA. The coverage may not be identical to your existing plan, but the premiums will in all probability be significantly cheaper.
If you’re retiring before age 65 or switching to a job in a much smaller company or startup without a group plan, an ACA or private plan might be your only alternative. In that case you’ll need to figure out whether or not any of the myriad alternative plans available in your area provides the coverage you’ll need at a better cost than the COBRA plan. Although that will require a lot more time and effort, some states offer a useful website through which you can compare various public plans’ premiums and medical/drug coverage. In California it’s https://www.coveredca.com/.
Note that COBRA only applies to companies with 20 or more employees. If you plan to leave a smaller firm under which you had been covered by group health insurance, and you live in California, you can still keep the group plan for 18 months at full cost through Cal-COBRA (California’s COBRA equivalent). Other states may offer a similar benefit.