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Ten Essential COBRA Questions

Posted on: November 5th, 2012 by Kristen Marie

looking at an insuranc policy

Understanding COBRA insurance is important for anyone whether they are employed, unemployed, insured, or uninsured. Knowing your options and the basics will ensure you are prepared in case you find yourself in a situation in the future where you have to make difficult decisions about health care and COBRA.

What is COBRA

COBRA, short for Consolidated Omnibus Budget Reconciliation Act, is a law that was passed in 1986 to let people continue to use their health insurance plan after job loss. Under this law, employees who meet the criteria for enrollment can continue to use the exact same health insurance plan they had when they were employed. In most cases it lasts for 18 months and will cost 102% of the whole premium. Additionally the benefits extend to children, spouses, and any other dependents.

Who can use COBRA

Under the law there are three conditions that must be met in order to use COBRA. First the health plan that the employee was on must cover at least 20 full time employees (or their part time equivalents) and must still be active. Secondly, the employee must have lost their insurance due to involuntary or voluntary job loss without gross misconduct. This could include quitting, being laid off, or even retiring. Finally, the person signing up for COBRA must be an eligible beneficiary which could include dependents and spouses. Additionally children and spouses can qualify for COBRA in the event of divorce, death, Medicare qualification, and loss of dependent status.

How many months can I use COBRA

In most cases COBRA insurance can be used for 18 months and it starts on the day you would have lost coverage. In some cases, COBRA can be extended to 36 months if you have a disability or second qualifying event. Additionally children and spouses can use COBRA for 36 months in the event of death, divorce, loss of dependent status, and Medicare qualification.

What happens to my insurance if I get divorced?

In most cases, as long as your spouse’s plan meets the qualifying requirement, then in the event of divorce you will qualify for COBRA for up to 36 months. It is your responsibility to inform the health insurance provider and sign up for COBRA. Failure to do this right away can result in not being eligible for benefits. In most states you are also eligible for COBRA in the event of legal separation.

How much is COBRA

Under the law COBRA insurance costs 102% of the premium. This includes the entire premium – both what you paid and what your employer paid – plus a 2% administration fee. You can usually find this amount listed on the COBRA enrollment paperwork or you can calculate it yourself.

Do my children get to use COBRA

As long as the covered employee qualifies based on the plan type, then children are eligible as well for COBRA coverage. The law and benefits extend to the entire family. If you learn you are not eligible for COBRA, then you can look into state CHIP plans that may cover your children.

What can I do if I can’t afford COBRA?

There are multiple options for people who can’t afford COBRA and the best option for you will depend on your health status, age, and personal situation. The most common options that people consider are private insurance plans, government or community insurance plans, and finding a trade/alumni insurance plan. Private plans can usually save people up to 65% on the monthly cost and actually offer very similar coverage to COBRA.

Where do I sign up for COBRA?

Signing up for COBRA is a relatively easy process. To sign up you will need to get the COBRA election form form your former employer and complete it by the due date on the form. You will also need to pay the premium to start the insurance. It is retroactive back to the day your coverage was lost and will cover any expenses incurred during that time.

How will my coverage change with COBRA?

Your coverage will not change at all with COBRA because you are keeping the exact same plan. In some instances if the company you worked for changes aspects of their plan, then your plan will also change just like it would if you were still employed.

Can I use COBRA if I quit?

Yes. COBRA insurance works for voluntary and involuntary job loss which includes when someone quits their job. Many people are unaware of this option and miss out on potentially using COBRA for their health plan.

Things to Ask When Shopping For Insurance

Posted on: August 13th, 2012 by Kristen Marie

looking at an insurance policyShopping for an insurance policy can be intimidating and it can be hard to understand the difference between plans as well as what would be best for you and/or your family.  Whenever you are shopping for a plan, make sure to always consider multiple plans and also to ask the important questions up front so you fully understand the plan.  Here are some questions you should always ask when you are considering a health insurance plan and/or comparing a health plan to COBRA insurance.

1.  How much is the monthly premium for the plan?  Can it change?  How much?  Asking this question up front is a good idea because cost is normally something everyone is thinking about.  However it is important not only to ask about the premium cost, but also to ask about if the premium amount can change and if there is a limit on how much it can increase.  Some health insurance companies are known to hook people with low premiums and then significantly up the costs after 3 or 6 months.

2.  Are you a state approved health insurance provider?  In order to provide insurance to you, the company must be authorized in your state to sell and provide insurance.  Always ask what states the insurance company is authorized in.  Also if you move or travel frequently, make sure to ask if the plan works when traveling or if you move to another state.

3.  How long is the policy length? What costs are there to cancel early? It is very important to know how long the policy you are purchasing lasts.  Some policies are very short term while others lock you in for a much longer period.  Since it is difficult to predict when you will get a job with health insurance again, it is a good idea to choose a plan that is flexible.

4.  How much are the co-payments and deductibles?  Co-payments and deductibles can end up adding large expenses to your health insurance plan.  A deductible is the amount you have to spend before the insurance will start to pay.  A co-payment is how much you have to pay whenever you go to the doctor, fill a prescription, or visit the emergency room for example.  Find out the the costs of these are and then estimate how often you go to the doctor to get a rough idea of how much you may spend annually on these things.

5.  How much does it cost for out of network care?  In the event you ever need care outside of your network, it is important to know those costs ahead of time.  Visiting a specialist many times may fall out of the network and you need to know what the cost will be if this occurs.

6.  Is there a coinsurance plan?  What is the maximum amount?  Coinsurance plans are very common but can also be very expensive if you have major medical expenses.  With coinsurance you are responsible for paying a percentage of the insurance costs, up to a maximum amount in most cases.

7.  Is there an annual limit?  Ideally you want a health insurance plan without an annual limit.  Although no one thinks they will ever reach their annual limit, of say $1 million, you can quickly reach that if you have a serious illness or major medical need.

Free Health Insurance Options When COBRA Costs Too Much

Posted on: August 8th, 2012 by Kristen Marie

doctor writing prescriptionsWhen you lose your job, you normally find yourself in a tricky and difficult financial situation. And for many this makes COBRA health insurance just too expensive to keep up with. Luckily, if you find you can not afford COBRA, there are some free and reduced health insurance options out there for people living at or below the federal poverty line.

  • Option 1: Medicaid – Medicaid insurance is offered through state governments to lower-income people, children and children, people living with disabilities, and the elderly.   The specific requirements for signing up and eligibility are designated by each state but almost always include people over 65, people with disabilities living under a certain income limit, and families with children living under the poverty line.  The cost of Medicaid depends on your income and will be determined individually by the Medicaid department in your state.  Medicaid normally covers everything that a typically employer sponsored program would cover.
  • Option 2:  CHIPs for Kids – CHIPs, which stands for Children’s Health Insurance Program, is a program designed specifically for families who earn too much money to qualify for Medicaid, but can’t afford to buy their own insurance plan.  In most cases, children are eligible if the family earns less than $45,000 (in 2012) a year and can use the coverage until they are 19 years old.  Pregnant women can also use CHIPs in most states.  CHIPs has a different cost in every state but normally does not exceed 5% of income monthly.  Coverage is similar to a group insurance plan.
  • Option 3:  Community Health Care Centers – Many communities have opened up their own health centers that provide free and very reduced cost care to residents.  Many people without health insurance find that these centers can be good places to go for care.  Normally you can learn about community health centers by contacting your local Health Department.

What If I Don’t Qualify For These Programs?

Some people will find that their income is too high to qualify for any of these programs, but COBRA is still too expensive. In that case, private insurance is probably the best option to lower your costs and find something that works for your budget. Individual and family plans will be the most expensive private plans, running about $400 monthly for a family. Catastrophic and high deductible plans can be as little as $100 monthly for a family but will only provide very basic coverage. To find out what private plans you may qualify for, you can use the health insurance quote box to learn about your options.

COBRA Insurance and Unemployment

Posted on: August 6th, 2012 by Kristen Marie

Dear COBRA Insurance Direct,

I recently lost my job and am facing unemployment for the first time in my life.  At the beginning I was excited about the option for COBRA coverage, until I looked at the notice and found out it would cost $1400 monthly to keep my plan for my family.  Given I have just lost all of my income and am unemployed, I am not sure how I am supposed to pay this amount.  I have some savings that will work for a couple of months, but then what? 

Sincerely,

Unemployed and Worried

Dear Unemployed and Worried,

Unfortunately the situation you are explaining is not uncommon for those who are unemployed.  Although COBRA, short for the Consolidated Omnibus Budget Reconciliation Act, is a great program that provides an important interim plan for many, it comes at an extremely difficult financial time for most given their unemployment.

The reason that COBRA is so expensive is that your employer no longer subsidizes the cost of the health insurance plan and you are responsible for paying the full premium.  Most employers subsidize up to 90% of the cost, so when you have to pay the whole cost yourself it can be quite a shock and quite expensive.  Additionally group health insurance plans are expensive in general because they provide coverage to people with any conditions and with a variety of risk levels.

So what can you do?  Well it depends on your situation.  If you have a preexisting condition or serious health needs, COBRA insurance or a PCIP plan, may be your best bet.  The reason is that many people do not qualify for private plans in this situation. However if you are relatively healthy, you should definitely consider a private health insurance plan, which normally can severely reduce the cost of insurance.  The cost can be reduced even more if you consider high deductibles and HSA savings accounts.

Another option is to sign up for a spouse’s health insurance plan or a government plan if you qualify.

Good Luck!

Tips for Cutting Monthly COBRA Insurance Expenses

Posted on: August 6th, 2012 by Kristen Marie

For anyone on COBRA insurance, or considering COBRA, you know just how expensive it can be.  Many people find that they are spending over $1000 monthly on COBRA premiums and for many it is just too expensive.  Luckily there are some ways you can save money and cut your monthly expenses so that you monthly bill is more affordable.

1.  Look at each family member separately:  One of the key mistakes people make when considering COBRA is believing that every family member must make the same decision;  when in fact each individual family member can elect to sign up for COBRA or not sign up for COBRA.  This means that you can pick and choose who signs up for COBRA and who uses an alternate insurance option.  In most cases, you can save the most money by signing up anyone with preexisting conditions or major medical needs for COBRA (since private insurance will be more expensive or they will be denied) and then sign everyone up for a less expensive individual/family plan.

2.  Consider state/federal insurance plans for children:  Many states have their own health insurance plans for children.  Many time any child without health insurance can qualify for these plans and they are normally known as CHIPs.  They come free or ay a very reduced cost and are available through state and federal governments.  Considering the tip above, you may want to sign up your children for state plans and remain on COBRA as an adult.

3.  Explore private insurance plans:  One of the best ways to save money is to look at private insurance plans.  These plans come in a variety of options – including HMOS, PPOs, and plans with less coverage – and can save people as much as 65% monthly for a full coverage plan.  The easiest way to learn what plans are out there is to get a free quote that shows insurance options.  Remember that in tip #1 you learned that you can sign family members up for separate plans, so putting healthy folks on a private plan can save lots of money.

4.  Seek part time work with benefits:  Even though you may be seeking full time work, sometimes if your health insurance costs are high it may make sense to take on part time work with benefits.  Many people do not realize that many companies offer benefits to part time employees.  Some places to look at are local schools and government offices and large companies like Starbucks, Target, Land’s End, Whole Foods, Home Depot, UPS, and Costco.  Even though the pay may be less, the benefits can make it worth it because they will save you major money on health insurance, especially if you have a preexisting condition or other major medical needs.

5.  Consider school and alumni health insurance plans:  Unknown to many, there are actually many alumni health insurance plans on the market that may offer discounted insurance to you if you graduated from their university.  You can easily find out about these plans by contacting your university alumni office.  Additionally, many community colleges, state schools, and universities offer health insurance options to students.  Consider enrolling in a class or as a part time student to qualify.  Not only can you increase your job prospects by learning a new skill, but you can easily access health insurance options.

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