Understanding Cobra

Tuesday tip: Make sure you use a qualified broker to help you decide on whether COBRA or Marketplace plans are right for you when leaving a job

This week I am going to talk about COBRA coverage because it seems to be an area where there is a lot of confusion. When leaving a job, there are many factors to consider. Most places will allow you to keep your insurance. This is called COBRA, and you can utilize that for up to 18 months.

There is a catch though with COBRA; you are responsible for 100% of the premium. This is why people think it’s expensive because you’re paying for the whole amount. While employed, your employer paid at least 50% of your premium for just you on the plan, (if you have family members on it, a lot of times you would have paid the full amount anyway) but if you leave that job, you’re paying the part that employer would have paid, and that’s why it seems expensive.

So the question is, when do you keep COBRA coverage? Well, if you have a PPO you really like and you have a lot going on medically, you may want to keep that coverage. Particularly if you’ve met your deductible for the year. This is something I explore with people when they ask if they should keep their coverage; what are your current needs? How are you going to use your insurance? Where are we in the year, and is it worth shifting plans?

Keep in mind that there is a 60-day window to sign up for COBRA – leaving a job is a ‘major event’. Premiums are charged month to month, and you don’t have to keep COBRA for the whole 18 months if you don’t want to. If you’re planning on not keeping COBRA because it is too expensive or not worth it benefits-wise, your options are to go with either a Marketplace plan (the 60 window applies) or a private insurance plan (PPO).

In Texas, there are not any PPOs in the marketplace. There are some private PPOs available, and most of those have limited benefits, which can sometimes be a great fit for people who don’t have a lot of medical needs. I can assess with you what your needs are, what medications you’re taking, who your doctors are etc., because if you’re healthy and you never go to the doctor, you may not want to pay for a private PPO plan.

If you get on a Marketplace plan, which is either HMO or an EPO, you’re likely going to be paying just as much as COBRA, unless you qualify for a subsidy. (I have discussed subsidies before in my previous blogs). If you do qualify for a subsidy, you would likely decide not to go with COBRA, and go with the Marketplace, because you would save money on premium. But if you don’t qualify for a subsidy, the cost of coverage will be very similar to the COBRA cost. This is because the employer would have had this coverage at their negotiated rate, depending on the company you worked for and the carrier that your employer had the coverage with.

Making these decisions can be complex, as coverage is calculated differently for employers than on the open market. This is why it is important that you use a broker that knows and understands Marketplace coverage, Cobra coverage, and private PPO options so that you can figure out what is the best choice for you. Everybody is different, there is no one size fits all. I strongly recommend you talk to a broker that can give you various choices, not just options from one insurance company so that you can make educated decisions.

There are a lot of brokers out there that just don’t understand all the complexities involved, especially when they only represent one company. That’s all they know. They don’t have the HR experience that I do – I’ve seen and dealt with many different plans. I have seen how this works from a provider standpoint, from an admin standpoint, because I did HR too. When a broker doesn’t understand all these complexities, it can be unfortunate because when people get coverage, they’re shocked to find out that certain things are not covered, or their doctors are not in-network. I try to manage your expectations about the coverage you’re getting because there is no coverage that’s perfect. There are going to be things you probably have to pay for out of pocket, and it all comes down to what you’re willing to pay for and what you need. I can help you pick a plan that seems to make sense for all the factors involved.

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