The relationship between health insurance and sudden unemployment is often complex. It is a nightmare scenario to lose your insurance along with your job, meaning you have to scramble to find an affordable replacement. According to the Census Bureau, employment-based insurance covered 55.7%of people with health insurance in 2015.
Once you lose your job, what happens next depends on whether you had employer-sponsored coverage before you lost your job and whether you are eligible to extend that coverage under COBRA. In some instances, you can transfer coverage to your spouse’s employer-sponsored coverage. If that option isn’t available, you could purchase your insurance in the healthcare marketplace.
Low-income employees are less likely to benefit from job-based coverage, which means they have fewer options if they lose their job. Depending on your circumstances, Medicaid is a possibility. Sadly, for a number of people, remaining uninsured is their only option. Nearly 46% of uninsured Americans do not purchase coverage because it is too expensive. However, if you have the option, COBRA is potentially a viable short-term coverage option.
What Is COBRA and How Can It Help?
The introduction of COBRA (Consolidated Omnibus Budget Reconciliation Act) in 1985 was good news for unemployed workers and their families because it allowed them to keep their employer-sponsored health insurance if they lost their job, reduced their hours, or quit their roles. You can keep COBRA coverage for up to 18 months(up to 36 months in certain situations).
If you utilize the COBRA option, it means you and your dependents can buy coverage under your former employer’s group health plan at 102% of the cost (the extra 2% is to handle administrative costs). You pay monthly premiums, and a third party such as Medicaid can make payments on your behalf. You are only eligible if you were the beneficiary of employer-sponsored coverage while you were an employee in a company with 20+ workers.
Despite the problems with COBRA coverage, which we outline below, it offers you an element of certainty over the short to medium term. The health insurance marketplace is unstable at present because many insurers that currently offer coverage on the exchanges are weighing their options. Indeed, some have already announced plans to leave certain states or markets in 2018.
Another major issue is the fact that we don’t know if the federal government will continue to provide marketplace insurers with cost-sharing reduction payments. As a result, no one has a clue what will happen if the current administration elects to cease these crucial payments as part of its efforts to repeal and replace the Affordable Care Act (ACA).
With COBRA, you receivethe same level of coverage as you would if you were still an employee of the company. You are entitled to the same benefits, choices, and services as every other beneficiary of the plan, along with the same rules and limits. If you have a child or adopt one during the period of COBRA coverage, he/she automatically becomes a beneficiary.
Issues with COBRA
There are limitations to COBRA. For example, you can’t utilize the option if you are self-employed or if you worked for a company with less than 20 employees. One major issue with COBRA is the cost. A single applicant could pay over $600 a month; this figure increases to over $1,600 a month for a couple with no children in some locations. You can learn more about sample COBRA costs in this University of Minnesota chart.In addition, you have to pay the full premium amount. If your employer only covered 50% of the cost, your healthcare costs will double, for example.
The potentially high cost of COBRA is often too much for eligible parties that receive amonthly unemployment benefit. For example, the maximum amount you will receive in Minnesota is $683 a week, and the amount you receive depends on your previous average weekly wage and your number of dependents. Even if you receive the maximum amount, a couple applying for COBRA will spend over half their benefits on health insurance. Incidentally, you can check out each state’s maximum allowed unemployment insurance benefits for 2017 to 2018 here.
Should I Consider COBRA?
The answer is yes, IF you can afford it. COBRA coverage ensures you and your family receive adequate protection,and it is currently a better option than taking your chances in the insurance marketplace. It is an especially good option if you or a loved one has a medical problem, as it is vastly superior to the open market in this instance. This is because the marketplace will cost almost the same, but it may not provide you with the same level of coverage.
Another option is to use COBRA as a very short-term solution until the Open Enrollment Period begins. Then, you can check to see if there are affordable options in your area before switching to marketplace coverage on January 1 if you find something that’s the right fit for you and your family. Otherwise, check to see if you are eligible for Medicaid. A total of 31 states plus the District of Columbia have expanded Medicaid coverage. It is now available to adults with incomes up to 138% of the Federal Poverty Level.
Given the risks associated with remaining uninsured, COBRA insurance is a worthwhile form of coverage for those who are eligible and can afford it. For COBRA to become a success, however, states must offer a subsidy to ensure it is more affordable. After all, those who need it are currently unemployed and can’t afford to pay hundreds of dollars a month to keep their family insured. Although it is a lifesaver for millions of Americans, far too many keep slipping through the net due to the high cost.