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Unemployed? Think Twice Before Locking into COBRA

Health Care Reform ChangesWith health insurance marketplaces opening less than a month from now, individuals and families can look forward to new coverage options, all in one place. This is particularly good news for those who may have been recently unemployed or laid off and lacking health insurance.

The current route taken by many individuals upon unemployment is to continue receiving employer-provided coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). Established under federal law, COBRA provides a transitional type of coverage for up to 18 months after losing one’s job. Enrollees are responsible for paying the entire premium plus a 2 percent administrative fee, which can sometimes prove difficult for those not making an income.

Consumer advocates advise that it may be smarter for individuals to wait and explore their coverage options when health exchanges open shortly as opposed to getting locked into a COBRA plan, which may prove pricier.

By doing a little homework upfront, consumers may actually be better off purchasing a plan through a marketplace.

Plans sold through the marketplaces will include the following:

  • Cover a set of essential health benefits; including ambulatory patient services, emergency services, hospitalization, prescription drugs, maternity and newborn care, preventive services & more
  • Offer a choice between 4 metallic plans or plan categories (bronze, silver, gold and platinum), which each require different levels of cost sharing
  • Offer cost sharing assistance to help offset the cost of premiums. Tax credits and subsidies are available to individuals with incomes between 100 and 400 percent of the federal poverty level, which equates to $11,490 – $45,960 in 2013

While many consumers admittedly don’t fully understand their coverage options, it’s important to do the math before rushing into a plan. Those that enroll in COBRA could actually end up paying more than if they had waited to buy through the marketplace, and it could take up to a year or until the next individual open enrollment period to switch plans.  This year the open enrollment period is from October 1, 2013 until March 31, 2014.

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