Knowing Your COBRA Alternatives

COBRA provides a guaranteed way to keep your group health insurance coverage if you lose it at work.

But is COBRA really best for your needs? What is the best option for you and your family?

Before you decline or cancel COBRA coverage, make sure you check out your COBRA alternatives to see which option is right for you.

Take a closer look at COBRA and its alternatives below:

COBRA

COBRA can provide a great advantage to employees who have recently lost their jobs and need to keep their health insurance coverage. But COBRA does have its disadvantages as well.

Pros

• Keep the same coverage you had with your former employer
• All conditions covered, no limitations, exclusions, or waiting periods
• Guarantees you the right to stay covered
• Guarantees continued coverage for your family

Cons

• After 9 months of the government subsidy, very high premiums
• COBRA is only temporary
• COBRA coverage cannot be tailored for your individual health and budget needs
• COBRA coverage does not give you the best value for your health insurance dollar

COBRA coverage is best for…

• Employees, spouses, or dependent children with pre-existing health conditions
• Those who expect to get on another employer-sponsored plan in the near future

COBRA coverage might not be a good option…

• If you're looking to get permanently lower premiums
• If you want tailored coverage, and the best value for your money

Individual Health Insurance

Individual health insurance is the best way to get the best health coverage value for your money by balancing cost savings and tailored coverage, but an individual plan might not work for those with pre-existing health conditions.

Pros

• For many, it provides the best value for a health insurance dollar
• Many times, features more affordable monthly premiums
• Customizable coverage
• Mobile coverage -- moves with you wherever your career goes

Cons

• May limit or exclude coverage for pre-existing health conditions
• You may have to change doctors
• Your premiums won’t be paid for with tax-free income straight from your paycheck
• No eligibility for a temporary government subsidy

Individual health plans are best for…

• People who don’t see the doctor often and/or only need major medical coverage for emergencies
• Those who want cost savings, customized coverage, and the best value in their health plan
• People who don’t know if they’ll be able to find another job with health benefits before your COBRA coverage expires.

Individual health plans might not be a good option for…

• Those with serious pre-existing health conditions such as diabetes or cancer
• People who anticipate enrolling in another employer plan or spouse’s employer plan in the near future

Special Enrollment in a Spouse’s Group Plan

Under the Health Insurance Portability and Accountability Act (HIPAA) you are allowed to enroll in a spouse’s employer plan without being subject to limitations or exclusions for pre-existing health conditions. Dependent children are also allowed to enroll in another parent’s plan without restrictions.

You and dependent children are only eligible for special enrollment if you each previously had health insurance when you declined your spouse’s coverage. Also, you must request special enrollment within 30 days of the loss of your employer-sponsored health plan.

FAQs: COBRA vs. Individual Plans

Should I decline COBRA if I want to explore your options?
No, do not decline or drop your COBRA continuation coverage if you already have it. You have 60 days from your job loss to explore alternative options, which should give you plenty of time to do a thorough search. If you decline COBRA now or drop it, you won’t be able to get back on in the case you can find alternative coverage.

What's the most important question I should ask to determine if COBRA or an individual plan is right for me?
There’s unfortunately not just one specific question to ask that will tell you what’s right for you. But you should ask yourself: What type of coverage am I looking for? Do I have any serious pre-existing conditions? Will I get employer health benefits again in the near future?

Seems like there is a lot of paperwork involved with COBRA. Is purchasing an individual policy easier?
When it comes to paperwork, COBRA may actually be a bit less work. You simply have to contact your former employer and they will tell you how to enroll. Individual plans will require you to fill out an application and possibly additional forms. But the amount of paperwork isn't the key -- always choose the plan that's best for your needs.

What rights do I give up if I move to an individual plan?
You don't have to give up any rights to move to an individual plan, but you may be subject to coverage limitations and exclusions if you have a pre-existing health condition.

Is there a way to know which of my conditions will be limited or excluded if I apply for an individual health plan?
Most insurance companies offer pre-underwriting opinions – also known as pre-approval – to clarify and help you understand what these likely outcomes and restrictions would be.

What do insurers consider pre-existing conditions? I have a health condition but I manage it well. Could another plan still deny me coverage?
Insurers consider some conditions, such as diabetes, hypertension, obesity, heart disease, cancer, and HIV as pre-existing health conditions. Many also consider pregnancy to be a pre-existing condition. Good management of your conditions, however, does help. And if you’re overall healthy and aren’t in and out of the doctor, a good suggestion might be to work with a professional agent to help you find a plan you’ll qualify for.

What if I'm overweight or have had a previous health condition? Am I stuck with COBRA?
If you have a previous health condition, an individual plan might limit or exclude coverage for that condition. If it is necessary to keep your coverage for pre-existing conditions, COBRA continuation coverage or enrolling in a spouse’s plan if available is likely your best bet.

I lost my job but my spouse still has his/hers. Should we stick with the health insurance we have or look into another option?
Enrolling in your spouse’s plan ensures you have coverage for pre-existing health conditions. But it never hurts to explore your options to see if you can find a better value. Just make sure not to cancel any coverage until you’ve been accepted in that better plan.

I'm healthy, but my spouse has had a heart attack. Does that mean we all have to move to COBRA?
No, if you’re healthy, you can look for an individual plan for yourself and your spouse can enroll in COBRA to keep his or her pre-existing health conditions covered.

I'm under 40 and in pretty good health and I rarely go to the physician unless I'm sick. What's best for me and what will help me save money?
Consumer-directed high-deductible health plans can be a good option for those in good health/rarely visit a doctor and want to save money on their insurance. Consumer-directed plans are individual health plans that feature coverage for catastrophic events and low monthly premiums.

The plan my employer offered was nationally recognized. I want to stay with a reputable company - one that I trust. How can I know if the alternative plan is one that is quality and will be around in a few years?
Most health insurance providers offer both employer coverage and individual coverage. If you liked the insurer used by your employer, it’s very likely they also offer individual plans. In the rare case they don’t, you can choose from a number of long-standing and strong companies that are here to stay – including UnitedHealthcare, the Blue Cross and Blue Shield companies, Humana, Aetna, CIGNA, and more.

I'm afraid that if I go with the lowest cost plan, if there's an emergency I'll be stuck with a bill I can't pay. Isn't it safer in the long run to stay with a plan that covers most emergency/catastrophic events?
To truly get catastrophic coverage, sometimes called major medical coverage, you have to choose a deductible that you could afford if absolutely necessary. Most insurance professionals will recommend that you shy away from plans with deductibles higher than $10,000, for example.

If I get a new job, can or should I just stick with my individual policy? I’m getting tired of getting new health insurance every few years. I would like to just stick with one plan.
Individual health insurance is completely mobile, and goes with you wherever your career takes you. If you foresee yourself moving from job to job and you want to stick with one plan, an individual health insurance plan is likely the only and best bet.

Learn more about COBRA…

Here are the basics on what COBRA is and how it works:

• COBRA Home
• Quick Overview of COBRA
• COBRA and the Economic Stimulus
• COBRA Alternatives