Upon leaving an employer’s health insurance, should you choose to go on COBRA or get your own individual plan? Which is a better option? It is commonplace in the USA today to leave an employer, for one reason or another. Your options for continued health coverage, after leaving your current employment, used to be quite limited, and the best option was to execute your rights under COBRA and extend your current benefits.
Due to health care reform, you now have another option. Upon leaving your employer, you are eligible for a special enrollment period, and are able to sign up for an individual plan at that time, with no preexisting condition limitations. This would be in lieu of extending your current benefits under COBRA.
Which is better? The answer is not so straightforward, and is based on a couple of factors. The first is the benefit level available. You have to compare the benefits available with your former employer’s plan and the benefits available to you with an individual plan. Individual plans often have, but not always, high deductibles and out of pocket maximums, and maybe a less rich plan that your employer’s plan. The second is the premium cost each month. To keep your current insurance through COBRA, you are required to pay 102% of the unsubsidized rate each month. Individual plans have a broad range of premiums, and there may be less costly plans available. The third is deductible level and out of pocket maximum level met in the current calendar year. When you get a new plan, the deductible and out of pocket maximum resets back at zero. This may be counterproductive, as you may have already met those limits and have your healthcare covered at 100% for remainder of the year, or have come close to the limits. As a result, a slightly higher COBRA monthly premium could end up costing much less over the course of the rest of the year than an individual plan with a lower monthly premium.
In conclusion, once you leave your employer’s health insurance plans, you now have options. You can choose to execute your COBRA rights, or you can use your special enrollment period to secure an individual plan. There are certain factors to consider when choosing between the two options. The benefit levels available, the monthly premiums, and the deductible and out of pocket maximum levels reached should all be considered when weighing your options. Once you have considered these factors, you will be able to make an informed decision on how to proceed with your health insurance coverage.
We can help! We can help secure an individual plan for you and your family. If you are interested in hearing more about your options, or have questions relating to other insurance, employee benefits, or long term planning, please feel free to reach out to the professionals at Associated Financial Consultants, an Associated Group company, at 954-983-5600.