COBRA and Short-term Health Insurance Plans

COBRA and Short-term Health Insurance Plans

Health insurance is one of the largest costs we face on an annual basis.  It often becomes a deciding factor when evaluating job changes and retirement options. With the rising cost of health insurance plans available for the consumer in the marketplace, individuals are sometimes conflicted with the dilemma of delaying retirement until Medicare age or staying in a job where they are no longer happy. Such qualifying life events can make one eligible for health insurance through the Affordable Care Act, however, this article focuses primarily on the alternatives to Marketplace Health Plans when addressing short-term gaps in insurance coverage.

When faced with layoffs, voluntary separation, death of a family member, divorce, or early retirement, there is the option for continued health coverage through Consolidated Omnibus Reconciliation Act (COBRA). This act allows qualified individuals to continue group health benefits for a certain period of time by paying for the entire premium (including the employer’s share), plus an administrative fee. While this premium can be steep, it does allow for individuals and families to maintain their existing group coverage without being subject to evaluation for pre-existing conditions or exclusions.

Some states offer an alternative to COBRA by partnering with a select number of insurance providers for short-term health insurance plans. Depending on need, these plans can range from less than a month of coverage up to a couple years. Many of these plans do not require a qualifying event to enroll and can be applied for at any time. These plans also often have monthly premiums that are more affordable than COBRA.  Although they can offer a potentially better alternative to COBRA, these types of plans do come with limitations. There can be an evaluation requirement to assess existing health conditions, which may ultimately result in the disqualification of coverage due to pre-existing conditions. Coverage is also provided based on a dollar amount for specific events – which may be more beneficial solely for emergency coverage rather than ongoing medical treatment.

Here is a summary of some of the key differences between COBRA plans and Short-Term Health Insurance Plans:

If you are a healthy individual and don’t foresee large, ongoing medical expenses in the near future, seeking a short-term plan to help cover emergencies may be beneficial to help you bridge any gaps in coverage.  For individuals and families with routine medical needs, paying the extra cost monthly for COBRA may be the prudent decision as you will be able to continue your existing coverage without worry. When facing transitions in life, it is important to take the time to evaluate all your options and select the one that is right for your specific circumstances. If you have any questions, we are here to help.

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