COBRA vs Private Health Insurance • Which is better for you?

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Have you just lost your job or are you afraid of losing it and wondering what will happen to your health insurance? Are you afraid of not being insured? COBRA gives you the power to keep your insurance even after you lose your job.

As with any health insurance, there are rules and regulations. Let Benzinga help navigate your way through the process that helps you retain your health insurance even after losing your job. With Benzinga at your fingertips, you’ll never have to go it alone.

What is COBRA?

COBRA, contrary to popular belief, is not insurance. COBRA stands for Consolidated Omnibus Budget Reconciliation Act and is a law passed in 1985 giving workers the right to continue their health insurance coverage even after leaving the workplace or being reduced to less than 30 hours. COBRA covers workers who quit their job voluntarily or involuntarily. What’s the catch? Your employer no longer pays part of the tab; now you pay all your premiums.

COBRA covers employees and their families when the employee loses their job or has their hours reduced to full-time. Key points include:

  • Employers with 20 or more workers are required to offer COBRA coverage
  • Coverage is limited to 18-36 months
  • The cost is high because the insured now pays 100% of the premiums

COBRA continuous coverage

Large employers with 50 or more employees must offer health insurance to their employees, paying at least part of the premiums. If you are fired, laid off, or fall below the 30 hours per week required to qualify, your employer is no longer responsible for contributing to your health insurance premiums. COBRA allows you to keep the same insurance at the same group rate, although you will now pay 100% of the premiums.

Qualification for COBRA

Not everyone qualifies for COBRA. If you worked in a company with 20 or more employees, your employer must offer COBRA. COBRA rules and regulations apply to private and public sector workplaces at the state and local level. Federal employees have their own COBRA type coverage.

To be eligible for COBRA, you must have been enrolled in a group health insurance plan through your employer. The insurance policy must be in force for more than 50% of the usual business days of the preceding calendar year. The same group policy should also be available for current employees. If you lost your insurance because the business went out of business, you are not eligible for COBRA. An employee is eligible for COBRA if they voluntarily or involuntarily lose their job or if their hours are reduced below the required 30 hours per week. Spouses are eligible if the covered employee is now eligible for Medicare or is divorced or legally separated. They are also covered in the event of the employee’s death.

How much does COBRA cost?

COBRA costs less than most private insurance plans because even though you will now have to pay 100% of the premiums, you will still get the same low group rate you had through your job. COBRA helps pay for costs incurred by:

  • Visits to the doctor
  • Hospitalization
  • Medical services
  • Prescription drugs
  • Ambulatory services

COBRA is an extension of the same private group insurance you had through your employer. Once the period of coverage is over, you must find your own insurance.

In addition to what your group insurance cost, you must add an additional 2% for administrative costs. A 2020 Kaiser Family Foundation study shows that employers pay up to 83% of group health insurance premiums. Once the employer stops contributing to the policy, many policyholders find the cost too prohibitive.

Can you save money buying COBRA?

If you lose your job or go to 30 hours per week or less, you lose your health coverage. Not only does COBRA guarantee that you won’t lose your health insurance, but it also saves you money. If you qualify for COBRA, you can stay on the same plan for the same group rate you had before for 18 to 36 months. If you went straight to a private insurance plan, you should start paying higher premiums right away. Even though you will now pay 100% of the premiums through COBRA, they are still cheaper than an individual private plan.

Private Health Insurance and COBRA Cost Comparison

Because you, the insured, are now paying 100% of your premiums for your private health insurance, the cost is going to be higher. After you lose your job, COBRA helps you keep the same insurance you had in the workplace, but not at the same low prices because your employer is no longer required to contribute to your health insurance.

Where can you buy private health insurance?

If you are looking for private health insurance – either through a Preferred Provider Organization (PPO) or a Health Maintenance Organization (HMO) – you can find coverage through an agent or from a broker. Most types of health insurance have an open enrollment period even if you purchase the policy from an agent or directly from the insurance company.

If you’re looking for more affordable health care coverage with financial assistance, Healthcare.gov (The Marketplace) offers grants to eligible individuals to help pay their monthly premiums. If you are 65 or older or permanently disabled, you may be eligible for Medicare. If you’re very low-income or indigent, you may even qualify for help through your state’s Medicaid program.

Benefits of private health insurance

If you have lost your job and your COBRA transition period has expired, you will either need to qualify for public health insurance or purchase private health insurance. Although more expensive than a group policy, private insurance offers better coverage. Employer-sponsored insurance, while affordable, doesn’t always provide the best coverage. A private and individual policy also gives you the opportunity to choose the benefits that suit you.

Benefits of COBRA

There is never any real advantage in losing your job. The benefit of having COBRA coverage is that you don’t have to lose your health insurance coverage either. Because your employer is now your ex-employer, there is no one else to contribute to your health insurance premiums. COBRA is meant to bridge the gap between insurance policies, ensuring that you are not left behind.

Although COBRA is more expensive than what you are used to paying, you still get the same group rate you had before. If by the time your COBRA runs out you are still not employed (or self-employed), you may find that the price of health insurance will remain the same. If you’re lucky, you’ll find gainful employment sooner rather than later and your new policy premiums will go down.

Alternatives to COBRA

If you lost your job, still need health insurance but find COBRA too expensive, you can consider alternatives such as:

  1. Healthcare.gov (the marketplace): Now that you are unemployed, you may find that you qualify for subsidized premiums. You must apply within 60 days to secure a place outside of the usual open registration period. Market insurance can be expensive if you don’t qualify for subsidies
  2. Short-term health insurance: Short-term health insurance plans, or STMs, offer deterrent credits, with premiums only half of those on the Marketplace. You can sign up for an STM plan any time of the year and get started in as little as a day. Disadvantage ? Coverage only lasts three months. STM claims may be rejected for health reasons and do not cover pre-existing conditions, unlike Marketplace plans.
  3. Health insurance (HBI): Limited benefit health insurance has been around for over 60 years. An HBI plan pays a fixed cash benefit to its members for doctor visits and hospital stays.
  4. High deductible private insurance: You can modify your insurance policy to lower your premiums by increasing your deductible.

Compare COBRA and Private Health Insurance

If you recently lost your job or think you are about to lose it, you want to know more about COBRA. Now is not the time to rush for new health insurance. For the next 18 to 36 months, you can focus on returning to full-time employment with the comfort of knowing that you still have health insurance. Learn more about COBRA.

Frequently Asked Questions

Is COBRA more expensive than private insurance?

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Is COBRA more expensive than private insurance?

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Philip Loyd, Licensed Insurance Agent

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COBRA is not health insurance but rather a 1985 law that allows you to keep your private coverage after you lose your job or are reduced to less than 30 hours of work per week. COBRA allows employees to continue to receive the same private insurance they received at the workplace, but it’s more expensive because their employer no longer pays their share.

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Benzinga

Is COBRA public or private health insurance?

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Is COBRA public or private health insurance?

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Philip Loyd, Licensed Insurance Agent

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COBRA is not health insurance. It’s the Consolidated Omnibus Budget Reconciliation Act of 1985, a law that says employees can keep their health insurance coverage. even after losing their jobs, for a period of 18 to 36 months. The law facilitates the transition of insured persons to public or private health insurance.

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Benzinga

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