Transition Coverage Options
Q: I am losing health insurance from my employer? Should I take COBRA or buy my own?
A: Great question that comes up in several situations: *Changing jobs; *Leaving a job to start a new business; *No longer eligible for the employer’s health insurance because work hours have been reduced; *Lose your job for any reason; *Employer decides to discontinue offering group health insurance; or *Employer goes out of business.
When a person loses health insurance from an employer, the coverage will usually continue through the end of the month. In most situations, if the business has 20 or more employees, the employer must offer COBRA to the employee and any family members that were participating in the employer’s plan. COBRA is an acronym for the legislation that created the law in 1986. The employer is required to offer continued participation in the group health plan for up to 18 months; in some circumstances 36 months. Dental and vision insurance may also be included. The employee must pay the full premium plus a small administration fee. The COBRA offer will include a 60 day period in which to either accept or decline. COBRA coverage can be cancelled at any time, but you only get one offer to accept it. If you decline the offer, there is no option to change your mind at a future date.
If there are fewer than 20 employees, there is a state requirement to offer continuation of coverage for up to 6 months. However, this is only available to those who have involuntarily lost eligibility.
When the situation is one where there is no ongoing employer sponsored health plan such as when the employer discontinues the plan or when the employer goes out of business, there will be no COBRA option.
When you lose employer coverage, you will typically have 4 choices to consider:
- Take the COBRA coverage until other coverage is available or until it expires.
- Purchase your own coverage either directly from an insurance company or through the Health Insurance Marketplace.
- Use short-term health insurance to cover your temporary gap in coverage.
- Live dangerously and don’t have any health insurance.
The first things to compare are the premium and benefits. The length of time that you need the coverage is important. Here are some bullet points that will help.
- COBRA may be the smartest choice for the current year if you have already satisfied most or all of the deductible. If you start a new plan, the deductible will start over.
- If the job change also means an income reduction, you may qualify for a Premium Tax Credit through the Health Insurance Marketplace that can lower the premium.
- Short term health insurance is significantly less expensive. However, it has some limitations. It does not provide any benefits for a pre-existing health condition or preventive care. It does not meet the requirements of the Affordable Care Act, so you will be subject to a penalty on your tax return if you have short-term coverage for more than 2 months.
- The risk of going without health insurance is obvious. You will also be subject to a penalty at tax time.
Work with a professional health insurance agent to advise you in making the best choice. The agents at ComPro will show you all of your options.
by Chris McPike, Vice President
402-488-5100 | www.comproins.com