COBRA: A Temporary Fix that can be a Life Saver
Losing a job has always been a major life event because of the obvious loss of income. But in recent years, as healthcare costs have skyrocketed, the stress that comes with a loss of income is compounded by the potentially crippling loss of employer-sponsored health insurance. Fortunately, employees are protected against the loss of health coverage. That protection comes in the form of COBRA (which stands for Consolidated Omnibus Budget Reconciliation Act, the 1985 legislation that put the coverage into place), and while it can be a lifesaver, it also, like the reptile that shares its name, can carry a pretty vicious bite.
The good news
COBRA’s purpose is straightforward: It allows you to continue health benefits you have with an employer even if you leave your job … regardless of whether you’re leaving on your own terms or were dismissed or laid off (unless you are fired for committing a crime). Under COBRA, you can continue your employer’s coverage for up to 18 months after leaving a job (family members can continue it for 36 months in some cases), with access to the exact same coverage you had when employed.
The bad news
COBRA is expensive. We often forget that the cost of our health benefits is subsidized by our employer. The amount you see set aside on every pay stub is only a portion of the cost for your coverage. So, when you leave an employer and continue your coverage under COBRA, the full cost – including the roughly 70% to 80% covered by your employers – becomes your sole responsibility.
What to do
If you leave a job, you have up to 60 days to sign up for COBRA. So, if you miss that window or fail to make your first payment on time, you lose the option. So, if you’re leaving a position, talk to your HR team and get all the information you need in case you do decide to sign up for COBRA.
Also, consider other options. Could you qualify for coverage under the Affordable Care Act? Could you get your own coverage through an insurer? To get answers to these questions, talk to an independent insurance agent. They can help you shop around and compare costs, or understand your ACA options or determine if, perhaps, COBRA is the best option for you.
The most important thing? Don’t go without coverage. While taking on the full cost of insurance can seem like a huge financial step, it’s a lot more affordable than the massive medical expenses you could rack up if you need care and don’t have any coverage at all.