Dear COBRA Insurance Benefits –
I am on the verge of losing my dependent status and have no idea what to do for health insurance. I have been on my parent’s insurance plan forever and am currently unemployed so there is no option for insurance from a company. The plan I have with them is really comprehensive, it seems like everything is included. But with that said I hardly ever use anything unless I randomly catch something. I would say I have used the coverage probably once in the last three years. I am pretty healthy in general.
With that said I am not willing to totally give up all coverage and cross my fingers that nothing happens. I want to have some type of coverage so that I am protected. What options should I be considering? Is COBRA a good choice?
Dear No Longer A Child
Losing your dependent status can be a tricky time and it is hard to know what type of plan to sign up for. The good thing is that you are one step ahead of the pack since you are already thinking about your health insurance and know how important it is to keep some sort of plan in place. Based on what you shared, here are some potential options for you ranging from least expensive to most expensive.
- Catastrophic or High Deductible Insurance: This is going to be the least expensive option when it comes to health insurance but will also provide the least amount of coverage. A catastrophic plan and high deductible plan are similar and basically will only cover emergency medical needs. For any other medical need you will need to pay out of pocket for the treatment. However it does ensure you are safe in case of anything serious and can be very affordable, starting at around $40 monthly.
- Private Individual Insurance Plan: The next option if you want more comprehensive coverage will be a private individual policy. These plans more closely resemble regular employer sponsored plans and can be very affordable for someone who is young and healthy. In fact they start at around $100 monthly and can include pretty comprehensive coverage.
- COBRA Insurance: Finally the last option, but definitely most expensive, is COBRA. With COBRA you would be able to continue to use the same health insurance plan you have with your parents for up to 36 months. The catch is that you must pay the entire premium plus 2% to keep the plan. On average this runs about $400 or more monthly. To find out exactly how much COBRA would cost for you, it is necessary to contact the plan administrator and tell them you are interested in signing up for COBRA and need to know the costs. Likely this will trigger them to send you an enrollment letter which will state the exact cost of the plan.
When the COBRA laws were passed in 1986, federal employees were exempt from being able to continue their health insurance after job loss with COBRA. However this did not mean that federal employees who used the Federal Employees Benefit Health plan (FEHB) had no way to continue their coverage. In fact, the government created it’s own COBRA like policy – the Temporary Continuation of Coverage, within the FEHB to protect employees in a similar way.
What is the FEHB Continuation Plan?
The portion of the Federal Employee Health Benefit plan that provides continuation is known as Temporary Continuation of Coverage(TCC). Under this plan qualifying employees can enroll in TCC after job loss and they can also extend coverage to their spouses and children. Also similar to COBRA in order to maintain this coverage, employees must pay the full premium plus a 2% admin cost. Additionally this coverage lasts for 18 months for the employee and up to 36 months, or 3 years, for the spouse and children depending on the qualifying event.
Signing up for Temporary Continuation of Coverage
Similar to COBRA there are strict rules and guidelines for signing up for TCC. You have just 60 days to apply for TCC and failure to complete the application form within this window means you are ineligible for coverage. In addition, once you sign up for TCC the benefits are retroactive back to the day you lose coverage. You can get the forms for signing up for TCC through the Human Records department of the federal office you work in.
What is a qualifying event for TCC?
There are multiple qualifying events for TCC that closely resemble the qualifying events of COBRA regulation. For employees the only qualifying event is separation from federal service without the presence of gross misconduct. The agency you worked for is responsible for determining whether or not something is actually gross misconduct.
For children there are additional qualifications for TCC including:
- Turning 26 years old
- Loss of status as a natural child, foster child, or stepchild
- Death of the employee in qualifying instances
Additionally for spouses there are other conditions that can trigger TCC coverage including:
- Death of the covered employee
Recently there has been a lot of press here in California about the intricacies of the laws and policies around divorce and health insurance. It all started when the ex-spouse of a city employee in Belmont decided to sue the town for not informing him he had the option to stay on his ex-wife’s health insurance plan. Instead this man signed up for COBRA insurance and ended up paying $524 a month for his coverage, which cost him over $18,000 in the long run. He is hoping to recuperate the difference in cost between the two plans and likely will win. Someone won a similar case just two years ago.
So what does that mean for you? Well it depends on the policy that your ex-spouse has. The first thing to do – ASK. Call the health insurance company or Human Assets department of your ex-spouse’s company and ask if there is an option in the insurance policy to cover spouses after divorce. This isn’t common, but some companies do offer such plans. And if the company does offer it, immediately find out how much it costs. Some companies will continue to subsidize the cost, but some will not. If they will not then you will pay basically the same as you would for COBRA and perhaps more than for a private plan.
Another rising trend among people getting divorced but concerned about health insurance is actually to stay married or only legally separate depending on the state they live in. For people with expensive medical needs or preexisting conditions, health insurance can be a major concern during divorce. So more and more people are staying married in amicable separations so that one spouse can continue to receive the medical care they need. While this normally begins as a temporary situation, many couples report that they continue like this for years to avoid astronomical medical and insurance bills, as well as maintain the exact same level of care and treatment.
Many times people are surprised by job loss and don’t have the time to plan their next move. But for some people they know when job loss is coming and have time to plan ahead. It is important for people in this situation to have a strong plan in place for their health insurance coverage before they lose their jobs. Make sure to take these steps before the last day of your health insurance coverage.
Preparing for Insurance Loss
- Know Your Health Insurance End Date: This may seem like an obvious step but many people forget to find out exactly when their employer health coverage will end. Depending on your company and its policies, your insurance could end the last day of your employment, the last day of the health plan billing cycle, or you could have a grace period of 2-8 weeks provided by your employer. Knowing this day is critical so you understand when to start your new plan.
- Negotiate Your Benefits Package: Many people negotiate benefits packages when they are accepting a new job, but you should also try to negotiate when you are losing your job. Many companies have the ability to offer severance or job loss packages that may include health benefits. This could include the company paying your COBRA insurance costs for weeks or months after losing your job. Always ask about the possibilities – there is nothing to lose.
- Know Your COBRA Insurance Options: The first step in determining what insurance plan you will use after job loss is finding out if you qualify for COBRA insurance and how much it will cost. For people who do qualify for either a state or federal COBRA plan, this could be a viable option for health insurance coverage.
- Consider Private Insurance: In addition to finding out if you qualify for COBRA, you should also fully explore your options for private health insurance. Private health insurance plans can usually offer a lower cost option to COBRA and for people who are generally healthy, almost the same coverage. You can get a free quote when you explore plans which can help you price out plans and understand your options.
- Explore a Spouse’s Plan: Find out if you qualify for your spouse’s plan and what kind of coverage it offers. Since employers subsidize so much of health insurance costs, if your spouses has a plan it can offer the most cost effective option. However always make sure to inquire about the open enrollment date and when new participants can be added to the plan. Some companies have very strict policies and spouses can only be added during open enrollment once per month.
- Consider Government Plans: The last thing to explore is if you or any family members can qualify for a government or community plan that is low cost. In most states children are eligible for reduced cost health care. Having children on a state plan can significantly reduce the overall costs for the family. Additionally depending on your health condition and age, you may qualify for other plans in your state.
Many of the questions we receive on a daily basis are regarding the current COBRA health insurance laws and how they affect people who have been laid off, quit their job, or retired from their job. The COBRA insurance laws have actually not changed much since they were passed in 1986 and still serve the same purpose to protect individuals and families from suddenly being without health insurance.
Under the COBRA health insurance laws people who lose, quit, or retire from their job without the presence of gross misconduct AND who meet certain government requirements can elect to continue the exact same health insurance plan with COBRA. This benefit extends to their family members as well. However the main difficulty for most people with the COBRA laws are that you are required to pay the entire cost of the health insurance plan. Since most employers pay anywhere between 50%-90% of the cost, this is a significant expense especially for someone who has just lost their job.
The three conditions that the government sets out in the law are known as qualifying plan, qualifying event, and qualifying beneficiaries. Qualifying plan refers to the type of health insurance plan the person had when they had a job. In most cases any plan that covered 20 full time employees will be eligible for federal COBRA laws. The second requirement, qualifying event, is how the person lost their insurance coverage. For employees this can be quitting, retiring, or losing their job without gross misconduct. For family members this could be that the covered employee lost, quit, or retired from their job, due to a legal separation or divorce, or because a dependent loses their dependent status. The final requirement, qualifying beneficiaries, is who else is eligible for coverage. In most cases anyone who was covered under the health plan can continued to be covered with COBRA insurance laws.
Anyone going through a divorce knows just how tricky it can be to navigate the waters. Not only is there substantial emotional difficulty regarding divorce but on top of that is all the legal, financial, and healthcare decisions that emerge. One of the most common questions we here is, “Can I stay on my ex’s health insurance plan after divorce?” The answer to this question is actually Yes and No.
Let’s start with the Yes. If you ex was on a health insurance plan that covered at least 20 full time employees, then you likely can elect COBRA insurance and keep your ex spouses’ plan for up to 36 months in most cases. Divorce is considered a qualifying event under COBRA so you have the right to sign up. The tricky side of COBRA though is that you are required to pay the entire premium, which is usually between 50-90% higher than what you are used to.
Now onto the No. COBRA insurance is only a temporary solution to health insurance after divorce. Not only will it run out at some point, it is extremely expensive. Moreover if you develop a condition while on COBRA it may disqualify you from future health insurance policies. Your best bet is to get your own health insurance as soon as possible. This can be done through your employer if available. If not, look into private health insurance. It can be surprisingly affordable. You can begin looking for private health insurance by getting free quotes and comparing plans.
For anyone who is unemployed, self employed, or works somewhere that doesn’t offer medical insurance, finding your own health insurance can be an extremely daunting task. There are hundreds of companies offering plans of all different types at all different price ranges. How do you choose a plan that is right for you and what options do you have? Use these resources to help you find a health insurance plan that is right for you.
- Government Uninsured Help Line: The Foundation for Health Coverage Education created this free helpline to aid people who are looking for health isnurance and want to know what options they have. Make sure you have information available about your income, number of family members, ages, and health conditions ready so they can provide you with all of your options. You can call them at 800-234-1317 or visit their website at Coverage For All
- Government Healthcare Website: To help people navigate the difficult web of health insurance options, the government created a website, HealthCare.gov, that helps connect people with private insurance companies and governmental insurance options. By entering information about where you live, your health conditions, family members, ages, and income, the site gives you a number of options for health insurance in your area.
- COBRA Insurance: If you lost, quit, or retired from your job in the last 60 days you are probably eligible for COBRA health insurance. With COBRA you can keep the health insurance plan you had with your employer for up to 18 months in most cases. In addition, many states offer state run COBRA insurance if you don’t qualify for the federal plan.
- Free Health Insurance Quotes: Similar to the government website, you can also get free quotes through a private health insurance company to learn about your options. Sometimes these sites are more up to date than the government sites and offer more accurate prices.
- Preexisting Condition Insurance Plans: If you have a preexisting condition and have difficult qualifying for health insurance, you may be able to sign up for a PCIP, or preexisting condition plan. These plans cover people who have preexisting conditions and can’t find health insurance.
For people who lost their job or were laid off, COBRA insurance is usually an option to continue health care for the employee and their family.
In most cases if your former health insurance plan covered 20 employees or more and the company is still in business, you can qualify for COBRA insurance under the 1986 federal law. This coverage lasts for 18 months in most cases and came about to protect people in your situation from suddenly going without health insurance coverage.
According to the federal COBRA law, when you are laid off your employer has 14 days to notify you in writing about your rights under COBRA. From there, you have 60 days to decide if you want to enroll in the coverage. If you do not sign up within that 60 day period or pay the premium, you will lose the right to coverage.
COBRA Insurance and Health Reform
In March of 2012, the Patient Protection and Affordable Care Act was passed by Congress to help ensure that more Americans have access to affordable health insurance and ensure people can actually get coverage. Under this law in 2014 there will be state run health insurance exchanges that people can use to purchase affordable health care. This law will not change COBRA insurance coverage in anyway, but it will likely decrease the amount of people who choose to use COBRA insurance.
The Cost of COBRA Insurance
With COBRA you get the exact same coverage that you had with your employer but the main difference is that you are responsible for paying the entire premium plus a 2% administration fee. This cost for most people is very expensive and normally runs over $1000/month for families. This is because most employers pay for up to 90% of the health insurance costs of their employees.
What Can I Do if COBRA Insurance is Too Expensive?
Most people can’t afford COBRA insurance. It is very expensive and most people who need it just got laid off so that kind of expense is unimaginable. According to some statistics COBRA insurance can eat up 60-70% of someone’s unemployment check leaving almost no room for other expenses. However luckily there are other options to explore if you can’t afford COBRA insurance. If you can’t afford COBRA insurance you should explore state and federal insurance programs like Medicaid and CHIP, private insurance which is normally much less expensive (you can get a quote below), and community health programs that provide free and reduced cost care.
For many people it may seem like health insurance is just too expensive and there are no affordable options for low cost or even free health insurance. However with some digging many people can find options that are less expensive than COBRA insurance and meet their healthcare needs. Explore the following options to look for affordable health insurance.
Option 1: Private Health Insurance Plans
Many people believe that private health insurance is never affordable but depending on your health needs, it may be a good option. If you are generally healthy and do not go to the doctor frequently you can likely find a policy that is affordable. Many people find plans that are less than $100 a month if they are willing to accept a high deductible.
Option 2: Medicaid
Medicaid is a free or low cost health insurance program that is designated for people under a certain income level. The specific income level varies from state to state, but if you qualify then you can qualify for free or very low cost care. You can visit Medicaid.gov to learn more about Medicaid options in your state.
Option 3: Children’s Health Insurance Program (CHIP)
The CHIP Program, of Children’s Health Insurance Program, is a program for children whose families do not qualify for Medicaid but can not afford health insurance coverage. Under CHIP, children are able to get free or very low cost health insurance and health care. To learn more about CHIP in your state visit InsureKidsNow.gov.
Option 4: Community Health Care Centers
Community health centers are non profit health care centers that provide free or very low cost care to people in the community. Anyone may go to a community health care center whether they have health insurance or not and receive care.
The Affordable Care Act was passed in 2010 and this law created Preexisting Condition Insurance Plans which helps people get health insurance who have been denied coverage based on a preexisting condition.
PCIPs are administered by your state government or the federal government through the Health and Human Services Department. It is meant to be an interim health insurance option for people who have been without insurance for 6 months, have been denied coverage, or have a preexisting condition. In 2014 with the passing of the Affordable Care Act, everyone will have access to health insurance and PCIP plans will no longer be needed. However in the mean time they provide health insurance to people who otherwise would be uninsured.
Preexisting Condition Insurance Plans
A PCIP plan will cover most things a regular health insurance plan would cover including doctor visits, hospital visits, prescription drugs, and more. Your preexisting condition will not be denied treatment with the covered. Additionally, PCIP plans shouldn’t charge you a higher premium due to the condition.
Eligibility for PCIP Insurance
- Are a US citizen, national, or reside in the US legally
- Have been without health insurance for six or more months
- Are not currently insured even if your plan doesn’t cover your condition and are not in a state high risk pool
- Have a preexisting condition or have been denied health insurance due to your condition