When Obamacare first went into effect, many people anticipated the beginning of socialized medicine and an end to the privatized health insurance that Americans had become familiar with. Of course, this knee-jerk reaction was far from accurate. The goal of the Patient Protection and Affordable Care Act (ACA), or Obamacare, was to offer affordable options to the millions of uninsured Americans who couldn’t afford standard insurance, not to mention those who had been deemed uninsurable by private insurance companies. The long and short of the situation, though, is that much of the existing structure for health insurance remains intact, and that includes COBRA coverage.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a law that was passed in 1985 to protect employees and ensure that they could continue their employee-sponsored health coverage even after losing a job. There are rules and restrictions that apply, but COBRA health insurance basically amounts to temporary, continued coverage under your existing group plan following the loss of a job. However, you need to understand what your new obligations are under COBRA (since your former employer is unlikely to continue paying a portion of your health benefits when you are no longer on the payroll), as well as what benefits would cause you to choose COBRA over other health insurance options.
At the time your employment is terminated, you become eligible for COBRA continuation coverage. The caveat is that you can only continue to purchase the policies you had in place at the time your employment ended, including your medical, dental, and vision plans. Your partner/spouse and any dependents covered under your plans are also eligible to continue coverage. Unfortunately, you will now have to pay for the policy premiums in full since your employer will no longer cover a portion of this expense, and you will sometimes be expected to pay even more than the original cost of the policy. In other words, COBRA coverage could cost you a pretty penny, and it’s very likely to cost you more than obtaining an independent policy on your own.
So why would you want to use COBRA coverage? There are a couple of reasons. First and foremost, you won’t have deal with the hassle of finding a new insurance policy. There will be no changes to your existing policy – you’ll simply pick up the payments that your employer was responsible for. In addition, you won’t face any penalties due to preexisting conditions. Although Obamacare has allowed individuals with preexisting conditions to obtain health insurance, there’s no guarantee that you won’t have to pay an exorbitant amount, depending on the benefits offered in the plans on the individual market. If you’re in this situation, sticking with COBRA could end up costing you less, at least for a little while.
COBRA coverage was never intended to serve as a long-term insurance plan. It is meant to cover the gap between leaving one job and finding another so you don’t go through a period of being uninsured. As a result, you will only be eligible for 18-36 months, depending on your situation and the person being covered (your children may be eligible for longer coverage periods, for example). So you’ll eventually have to obtain a new health insurance plan. But COBRA can be a useful interim option as long as you understand its benefits and drawbacks. And when you comparison shop with a licensed agent, you can make sure that COBRA, or any other short term policy, is your best choice for coverage.
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