Just about every day the news is filled with stories about more companies that have either laid off employees, cut back on benefits, or both.
For the thousands of individuals who have lost their jobs, this also means that they will soon lose access to their employer sponsored health insurance benefits.
And for many, this can cause a substantial hardship.
One option for these individuals, as well as their covered spouse and dependents, is continuing their group medical insurance coverage through COBRA.
This option, a result of the 1986 Consolidated Omnibus Reconciliation Act passed by Congress, allows employees and their dependents to retain their employer sponsored health insurance plan due to either the loss of their job, qualifying change in their job, a reduction in hours, or based on another qualifying event.
How Does COBRA Work? Most employers, with few exceptions, that employ at least 20 full-time workers are required to offer COBRA coverage to their employees.
When an employee elects to continue their health insurance coverage through COBRA, they are allowed to keep their existing plan.
Therefore, there are no changes required with regard to the individual's current health care providers or pharmacies.
In addition, because the employer typically handles the administrative portion, there is no additional paperwork required by the employee and / or their covered dependents.
Because the actual coverage remains the same, opting for COBRA will also not require any medical exams or other determinants with regard to qualifying for coverage.
When Not To Opt for COBRA Although continuing health insurance coverage through COBRA offers convenience to covered individuals, there are several factors to keep in mind that may make alternative options more attractive.
Certainly, one of the biggest criteria is cost.
When an individual is covered through an employer sponsored health insurance plan, typically the employer will pay some or all of the cost.
However, when coverage switches to COBRA, the covered individual will be responsible for 100 percent of the premium.
In addition to the cost of the actual coverage, most who opt for COBRA will be charged an additional 2 percent by their former employer.
This is due to the cost of administrative fees and other associated expenses.
Another factor to keep in mind regarding COBRA is that the coverage is temporary.
In most cases, COBRA benefits will run out after 18 months.
There are some exceptions to this, however, in that if the employee becomes disabled, benefits will be extended for up to a total of 29 months.
In either case, covered individuals must keep in mind that their benefits will eventually run out.
This can be disastrous for those who acquire significant health conditions during the time they are on their COBRA plan.
Where to Look If COBRA Costs Too Much When individuals lose their source of income, the cost of anything can become a huge factor - even if that cost is associated with health care coverage.
With an average cost of continuing health insurance benefits at 102 percent of the previous cost, those who are watching their budget may need to choose another alternative for their health insurance needs.
There are some instances whereby the participant in COBRA can choose a lower cost health insurance plan.
For instance, should their former employer offer a PPO type of benefit, then the premium for the former employee's COBRA coverage could be lessened by opting for a lower amount of benefit.
In many cases, though, this lowered cost may still be prohibitive.
Another choice for the individual is to seek stand-alone coverage through a regular health insurance policy.
These plans can cover a single individual or they can have options to cover the individual as well as their spouse and / or other dependents.
In this case, it is likely that the covered participants can design a policy with certain benefits that work for them - as well as for their budget.
Some of the ways that the premium cost of a stand-alone insurance policy can be reduced is by choosing a larger amount of deductible or by going with a lesser amount of covered benefits.
In addition, policy holders are typically given a premium discount if they pay for their coverage on an annual or quarterly basis as versus paying monthly.
This is because monthly premiums often include an additional administrative charge.
Temporary Health Insurance Coverage Still another option that could be available for an individual who is watching their expenses, but who still requires health insurance coverage, is a temporary or short-term plan.
These types of policies offer benefits for only a short period of time - usually 12 months or less - however, they can be a great way to fill in the gap between employer sponsored coverage running out and qualifying for a new employer's benefits.
In the case of temporary health insurance coverage, it is important to keep in mind that it is just that - temporary.
Therefore, it could be a good option for those who have the following circumstances:
- Those who no longer have dependent status under their parents' health insurance coverage;
- Recent college grads who no longer qualify for student coverage but will likely soon be covered by a new employer's plan
- Those who are between jobs and feel that they will soon qualify for a new employer sponsored health insurance plan;
- Individuals who have been recently discharged from service in the military.
This way, exact benefits may be determined based on a specific situation as well as a plan that can fit well within given budgetary guidelines.
In addition, a long term plan may be created so as to be assured that benefits will not run out within a certain period of time.