COBRA Health Insurance: 6 Pros and Cons You Need to Know

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Have you lost your job recently and are worrying anxiously about how to continue with your health insurance plan? Don’t panic! First, check out if your former job’s health plan for you falls under COBRA Health coverage or not. Haven’t you heard about COBRA Health Insurance before? 

COBRA Health Insurance: 6 Pros and Cons
COBRA Health Insurance: 6 Pros and Cons

Wondering how does COBRA insurance work? To learn about this insurance, you have to read this article, and we assure you that, after reading this write-up, all your doubts will get cleared. So, let’s proceed. 

Read more: 5 Anthem Health Insurance Schemes You Must Know: Tips to Make Informed Decisions for Your Health

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What Is COBRA Insurance?

COBRA is the short form of the Consolidated Omnibus Budget Reconciliation Act. It’s a health insurance policy through which the eligible employees, as well as their dependents, continue to get health insurance coverage benefits even after losing their job or experiencing work hours reduction. Employers with twenty or more full-time-equivalent workers are eligible to offer their employees COBRA coverage. 

The COBRA health insurance coverage extends for a fixed interval of eighteen or thirty-six months, depending on applicable scenarios. 

This insurance policy is expensive because the recently unemployed individual pays the entire insurance cost. In most cases, the employer of a company only spends a significant amount of money on the healthcare premium of his employees. 

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If an employee loses their health insurance because of their job loss during the economic crisis of 2020, they are entitled to a federal exchange’s special enrollment period. This period gives you a time of sixty days for enrollment. You can think of it as a way to discover an option for cheaper health insurance than COBRA. 

what is cobra insurance
what is cobra insurance

From 1st April 2021, the qualified individuals are getting a hundred percent COBRA premium coverage, provided by ARPA (the American Rescue Plan Act).

You may also be interested in 3 Must-Know Self-Employed Health Insurance Options: Tips for Securing Your Health and Finances

The US’ large employers of various companies with fifty or more full-time hireling are expected to provide COBRA health insurance to employees who qualify for it. The employers provide them insurance by paying only a portion of the insurance premiums. 

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An employee can become ineligible for COBRA and may not receive health insurance benefits if he gets laid off or falls below the minimum threshold of the number of hours labored per week. 

If an employee becomes ineligible for COBRA, their employer shall stop making their payment for the worker’s insurance premiums. If such a situation arises, COBRA asks the employee or their dependents if they want to continue with the same insurance for a limited time period at their own expense.  

Under COBRA medical insurance, the former employees of any company, their spouses, their dependent offspring, and their former spouses are entitled to get the continued coverage of medical insurance at group rates that would otherwise have not been continued. 

Yes, they indeed have to pay much more for COBRA’s premiums than when they used to pay as employees of their former companies. However, this payment amount is much less as compared to the premium amount of any other individual health insurance plan. 

The health insurance plans of COBRA give coverage for prescription drugs, vision care, dental therapies (comes under COBRA dental insurance), etc. Life insurance or disability insurance schemes don’t fall under COBRA. 

COBRA Health Insurance Benefits: 

For eligible candidates, COBRA insurance rules offer identical coverage that a current employer offers to his current employees. If any benefit-related plan changes for the existing employees, the same will apply to the qualified beneficiaries. Any qualifying beneficiary of COBRA can opt for the same choices that a non-COBRA beneficiary makes. 

In the same manner, under COBRA, the current beneficiary’s insurance coverage will be exactly the same as that of the former beneficiary insurance coverage. 

COBRA will give you a minimum of 60 days, and within that, you are required to decide if you want to elect continuation coverage or not. Also, if you waive coverage in a hurry, you will get the privilege of changing your mind within the same time interval of the election period. 

Depending upon applicable procedures, COBRA medical insurance coverage, from the qualifying event’s date, prolongs for a fixed interval of eighteen to thirty-six months. 

You can be eligible for extending the maximum duration of continuation coverage (18 months period) in case any one of the family’s qualified beneficiaries is impaired and fulfills specific requirements. 

Also, the eligibility prevails on occurring a second qualifying event that includes the death of the covered employee, the employee’s legal separation from his wife, his privilege for Medicare, and the loss of the plan’s dependent child status. 

COBRA Health Insurance Cost

At a glance, the term group rate of this insurance may look like a great discount offer. However, the reality is that COBRA Health Insurance cost is comparatively expensive. 

When the employee is doing the job, his employer pays a significant portion of the premium, say 80 percent, for him. However, once he gets out of the job, the whole premium amount must be paid by the employee with an extra 2 percent administrative charge. 

Nevertheless, the premium cost of the insurance will not surpass 102 percent of the total employee plan cost for those who haven’t undergone a qualifying event. 

COBRA Health Insurance Cost
COBRA Health Insurance Cost

COBRA insurance cost is less than other health insurance coverage plans. However, the people who have lost their job in the economic crisis of 2020 and as a result, also lost their health insurance are entitled to a period of “special enrollment” on federal exchanges and gets 60 days for signing up. 

This is a way to discover a relatively cheaper insurance alternative than COBRA. In case of an employee, after leaving his job, can’t afford to pay COBRA premiums, they can cancel their insurance policy in COBRA. 

When Does Cobra Coverage Start?

If we assume that one is paying all the needed premiums, then the starting date of Cobra Coverage is the qualifying event date. 

And the Cobra Coverage duration length depends on the qualifying event type, which is responsible for the loss of the group health policy coverage of the qualified beneficiary. 

6 Pros Of COBRA Health Insurance: 

  • With COBRA, you can maintain the exact plan that you were maintaining while you were an employee 
  • The spouses, children as well as former spouses of the employees and former employees are eligible for the coverage 
  • This health insurance bridges the gap for health insurance until one qualifies for a new health plan. 
  • You get 60 days in which you can decide if you want to continue with COBRA health insurance or not. The coverage of COBRA is retroactive. 
  • With COBRA, you are eligible to use the exact claims for pharmacists, physicists, and filing methods, that you used to claim previously.
  • With COBRA, your out-of-pocket costs are saved.

If you are a frequent traveler and go out of the state frequently or have two or more homes, COBRA health insurance’s employer-sponsored health plans will provide you with broader networks than non-group health plans.

6 Cons Of COBRA Health Insurance:

  • COBRA plans expect a high premium from the former employees
  • You have to take your decision of accepting or declining the proposal of COBRA coverage within a sixty day
  • One can remain in the COBRA scheme for a fixed amount of time, ranging from 18 months to 36 months. 
  • Considering the coverage to be retrospective, if you wait to accept COBRA, you must pay its premiums before the qualifying event date. 
  • COBRA Coverage of a person changes if their employer changes the coverage of the COBRA plan. 
  • All employer group agendas do not offer COBRA.  

Your plan for COBRA health insurance may be unavailable for you in case you have left your state temporarily/permanently, or the health system is restricted. 

Process Of Signing Up For COBRA health insurance: 

It’s the duty of your employer and health insurance administrator to let you know about your right to enroll the names of you and your family in COBRA. 

After you are let know about it, you will have 60 days in your hand, and within that time, you have to decide between continuing the COBRA health plan or discarding it. If your decision is positive and you want to sign up, tell your plan sponsor that you qualify for this health insurance plan since you are a divorcee or have undergone legal separation. 

You can also tell him about your loss of dependent and child status. Primary employee not ordained to do so? No worries! Still, you can elect to take COBRA. 

Frequently Asked Questions (FAQs) about COBRA Health Insurance

Q. What is COBRA insurance, and how does this insurance work?

Ans. COBRA is “the Consolidated Omnibus Budget Reconciliation Act”. It’s a federal law-related act, continuing since 1986, and needs private insurers for group health plans that are employer-sponsored in order to keep a work-based medical coverage scheme in place after the qualifying of events.

The events involve being laid off/terminated (excluding any gross misconduct behavior). The events also include losing coverage because of a divorce or primary beneficiary’s death (resulting in dependency) or work hours cut. 

Q. Is it worth paying for COBRA?

Ans. If it’s worth spending for COBRA health insurance or not depends upon your personal choice after going through its advantages and drawbacks. Its advantages are that it simply allows you to retain the same plan you used to have when you were an employee of the organization in which you worked before. It considers the former employees’ spouses, children, and ex-spouses eligible for the insurance. Besides, COBRA provides coverage until you continue with any new medical insurance plan, thus covering the gap. 

With Cobra, you will get 60 days’ time, within which you can decide if you want to continue it or not. Also, you will get the right to claim for the same filing methods, physicians, and pharmacists for which you used to claim before.

Moreover, with this insurance, your out-of-pocket costs are saved. Furthermore, being an employer-sponsored health policy will provide you with broader networks than what the non-group health policies provide while you are out of state or you possess two or more two homes. 

Q. What is the purpose of COBRA insurance?

Ans. Its purpose is to provide coverage to those who want to get the same health insurance policy to be continued even after their resignation/termination from the job. 

Q. Is it better to use COBRA or Obamacare?

Ans. In general, Obamacare insurance is cheaper and more reasonable than COBRA. This is because Obamacare makes one eligible for nationwide ACA subsidies, pivoting on one’s income. However, COBRA health insurance amounts to an average of 599 US Dollars per month.

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Michael Thompson
Michael Thompson
Michael Thompson is a highly experienced health insurance agent with over 10 years in the industry. He specializes in helping individuals and families find the best insurance solutions to protect their health, finances, and assets. His commitment to excellence and attention to detail have earned him a reputation as one of the leading insurance agents in the region.

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