As people choose to leave the corporate world behind to start their own business or perhaps get downsized, the opportunity to opt into COBRA is frequently available to them. This allows them to continue their current coverage at full “retail” cost for (normally) up to 18 months from the time that they separated from their employer.
This can be a confusing time for people in Colorado because it’s not uncommon to find out that continuing your current coverage will cost up to $2,000 per month or more for a family of four.
Why it is smart to keep your current coverage through COBRA:
- A family member may have an ongoing chronic medical condition that requires access to your already available Physicians and Hospitals based on your current health plan.
- Expensive prescriptions are known to be available within your current formulary for a reasonable co-pay. Contrast this to finding that a new plan now requires you to pay $300 per month for a script that you have been accustomed to paying $30.
- PPO Network coverage is included. Your current plan may provide Aetna, Cigna, or United Health nationwide PPO coverage. In Colorado, and in most states, PPO coverage is no longer available for ACA, connectforhealthco.com, plans. So your options for Physicians and Specialist can be limited, and any out-of-state coverage is almost non-existent except in emergency/life threatening situations.
- You have already met an individual or family annual deductible. If your deductible has been met, and you’ve been putting off that knee scope or lumbar spine MRI or surgery, you will be best served to take advantage of accessing no-cost services for the rest of a calendar or policy year. Even if you are paying $2,000 per month for this coverage.
- You only need to bridge a couple months to your next job which will include a robust corporate and health benefit. If so, use COBRA. Or, free-ride (see below).
Why you may want to forgo COBRA:
- You are healthy, and it’s simply too expensive. There are other, private health insurance options that are frequently 50% less expensive than COBRA. These normally include a good-health discount and true nationwide PPO coverage, so they give the individual a great safety net for the near to long term while saving thousands of dollars per year.
- You might be better served to enroll into the Colorado state-based Medicaid plan. This plan is still misunderstood: if you don’t have a paycheck, or little to no household income — for even a month or two — you should find that you can qualify for Colorado Medicaid. https://www.colorado.gov/pacific/hcpf/colorado-medicaidHere is the income guideline: https://www.healthfirstcolorado.com/apply-now/?tab=do-i-qualify
It’s still a common misconception that just because you have your house paid off and maybe you have $50,000 in the bank, you cannot qualify for the Colorado, state-based Medicaid plan(s), including CHP+. This is simply not the case because it is solely income based. Not asset based. There are some limitations within the Medicaid system, but I personally have had friends and family members whose lives have been saved (yes, literally) because they had access to great care through Medicaid. I’m happy to discuss this.Note: Medicaid IS asset based when referring to long-term care or nursing home care for the elderly or disabled. - You may qualify for a federal subsidy through http://connectforhealthco.com. If you’ve gone from a two-income household to a one-income household, for example, you may now be within the threshold of household income that allows for you to qualify for a federal subsidy. This can prove to be a double-edged sword: if you qualify for an $800 /month subsidy, but then resume earning your normal salary four months later, you will likely find that you will have to pay $800 x 4 months back to the federal government when you do your taxes the following year because you exceeded the aggregate income threshold as of Dec 31 of that particular tax year. Tread lightly here, but this can be a great assist in the correct circumstance. Often better to seek a discounted off-exchange plan, if you can qualify.
COBRA Fundamentals
Opting into COBRA is often misunderstood.
Normally, when you separate from an employer, your health benefit will continue as normal until the end of the month that you have left your Company. At that time you will begin a COBRA window. Let’s say that you leave your current position on April 17th. Your current health plan, probably subsidized by your employer, will remain in place until April 30th at midnight. May 1st, you are normally able to opt in to COBRA, in arrears, for up to 60 days. Sometimes 90 days. This means you can send a check to the benefits administrator of your previous company to pay for continuing coverage of your health plan at any time within the next two months. This also gives you a window to free-ride.
Free-ride? Staying with the above example, if you were being wheeled into the Emergency Room on June 28th with a severe illness or injury, you could call over your shoulder to your spouse or child or good friend and instruct them to back pay your COBRA health insurance premium in full to May 1st so that this particular forthcoming claim would be paid within the parameters of your health insurance plan’s deductible and coinsurance.
If you had no health events during that two month period of time, you may have the opportunity to pay nothing during May and June, and during that time set up coverage for July 1st within one of the options listed above, thus saving the $2,000 per month required for COBRA continuation in the above example for a family of four.
Of course, now you no longer have the option to keep that coverage once the 60 days have passed.
I usually interact with the Sole Proprietor and Small Business owner; and within their circumstances, it is almost always better to forgo a COBRA offer because of its excessive expense. Same for individuals between jobs.