So you decided to join the “Great Resignation” and quit your job. Or maybe you lost your job when the company cut back. Perhaps you want to be your own boss and try your hand at freelancing. Whatever the reason, if your traditional employment has ended, you may need to figure out what to do about health insurance.
If you’re under the age of 65 and not yet eligible for Medicare, two popular options include COBRA (Consolidated Omnibus Budget Reconciliation Act) and the ACA (Affordable Care Act).
Here’s a look at what these two programs are, and which one may be the best fit for you.
Another way to get health insurance? Calling a licensed insurance agent at 1-800-273-8115 to talk about available plans. Or search uhone.com for more information.
COBRA or the ACA: What’s the difference?
COBRA is a federal law that allows you to keep yourself, your spouse, an ex-spouse and your dependents on your former company’s group health plan when your job ends. It generally applies to employers that have health coverage for at least 20 employees. Some states also have their own mini-COBRA laws for companies with fewer than 20 employees.
When you choose COBRA, you’re opting to continue with the same health insurance plan you already have, says Caitlin Donovan, senior director of the National Patient Advocate Foundation. You’ll be able to keep all your same doctors, and all your prescription medications should still be covered under your existing plan’s formulary. But you’ll have to cover the plan’s costs, which include monthly premiums (insurance bills), plus possibly an additional 2% administrative fee. Coverage can last 18 to 36 months.
The ACA, on the other hand, is a health care reform law passed in 2010. The ACA Marketplace allows Americans to get health insurance coverage regardless of whether they have a preexisting condition, such as diabetes or cancer. It also has a list of essential health benefits that don’t change from plan to plan.
Under the ACA, you can pick a health plan from your state’s health insurance exchange (a website where you can buy insurance). But keep in mind that even if you purchase a plan from the same health insurance company, it may be different from the plan provided by your employer.
“You’ll want to make sure all your medical providers are still in network or, if they’re not, that you’re comfortable switching health care providers,” says Donovan. You’ll also need to make sure that your prescription meds are covered under your new plan’s drug formulary so that you don’t get hit with steep out-of-pocket costs.
Since you’ve just lost your job-based health coverage, you may qualify for a Special Enrollment Period, or SEP. This means you can enroll in one of these marketplace insurance plans if you do it within 60 days. (There is an exception to this rule due to COVID.)
COBRA or the ACA: Which one is right for you?
In Donovan’s opinion, if you’re looking for the cheaper option, that will generally be the ACA. Your monthly premium payments may cost less on the exchange. This is especially true if you qualify for a premium tax credit, which is based on your state, household size, and overall income.
But other factors are at play, too. You need to consider the cost of deductibles (the amount you pay for health services before your insurance pays the rest), copayments (a fixed dollar amount you pay every time you use health services), and other out-of-pocket costs, says Donovan.
“If you’re close to meeting your deductible on your current insurance plan and you have high health care costs, it may be worth it to temporarily stay on your COBRA plan,” explains Donovan.
The same holds true if you’re far into your employer plan’s year and have already met your deductible. In this case, it may be best to stick with your current plan and go on COBRA.
COBRA or the ACA: More things you should consider
While you may still be making up your mind on whether to go with COBRA or the ACA, it’s worth keeping these two factors in mind:
- Your current health. If you’re undergoing treatment for a medical condition, you may be better off choosing COBRA to make sure you stay with your medical team, says Donovan. (If you do decide to switch to the ACA, a preexisting condition won’t prevent you from enrolling in new coverage or having to pay more for it.)
- Your age. Check if your employer plan raises costs based on age. With an individual ACA plan, premiums can be up to 3 times higher for older people than for younger ones.
In Donovan’s opinion, while you might be tempted to hold on to your job-based health insurance via COBRA, it can be expensive. That’s why it could be good idea to explore all insurance options.
One way to do that would be to call a licensed insurance agent at 1-800-273-8115 to discuss your options or explore uhone.com to browse available plans.
Healthcare.gov. “Enroll in or change 2022 plans — only with a Special Enrollment Period.” Retrieved from https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/ Accessed April 14, 2022.
Healthcare.gov. “Health coverage options if you’re unemployed.” Retrieved from https://www.healthcare.gov/unemployed/coverage/ Accessed April 5, 2022.
Healthcare.gov. “How insurance companies set health premiums.” Retrieved from https://www.healthcare.gov/how-plans-set-your-premiums/ Accessed April 5, 2022.
U.S. Department of Labor. Retrieved from https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-consumer.pdf Accessed April 5, 2022.