COBRA Insurance Buying Guide: Health Insurance

COBRA Insurance coverage is not an insurance policy. COBRA insurance is an extension of your health insurance benefits when you are no longer employed. COBRA Insurance rules include being terminated from a job, going through a divorce, and becoming eligible for Medicare. You may be able to use COBRA coverage if you have become unemployed during the pandemic.

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Eric Stauffer is a former insurance agent and banker turned consumer advocate. His priority is to help educate individuals and families about the different types of insurance they need, and assist them in finding the best place to get it.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Mar 2, 2021

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COBRA is not an insurance policy. It is a law that the federal government passed in 1986.  COBRA helps individuals who have lost their jobs get medical care in spite of being unemployed. As part of the law, employees can still maintain the health insurance plan they had at their old jobs as long as they meet certain requirements.

However, it is important that individuals are able to pay the full premium in a timely manner. The law is an integral part of the Consolidated Omnibus Budget Reconciliation Act. This is where the name COBRA insurance comes from. COBRA insurance is available in all 50 states in the U.S.

Before you decide on COBRA, see if you can get a cheaper option for coverage on the open market. Compare health insurance quotes now.

Who is qualified to use COBRA insurance?

There are three stipulations that people need to understand to determine if they qualify for COBRA insurance. The first is the qualifying plan. Anyone working in a company with more than 20 employees qualifies for COBRA insurance.

A qualifying event refers to the manner in which the person lost his or her health insurance. Some qualifying events include termination, reduction in work hours, divorce or legal separation, loss of dependent status, and qualified employees becoming eligible for Medicare.

You can qualify for COBRA if you lost your job due to COVID-19 and you meet the other criteria.

A qualifying beneficiary refers to a person who can qualify for COBRA insurance other than the covered employee. This includes dependents.

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Who can benefit from COBRA insurance?

COBRA can be helpful in a number of situations. It generally acts as a stopgap option for those that are in between health plans and protects you from unexpected medical bills.

• Individuals with preexisting conditions without a new medical plan who are not considered eligible for PCIP insurance.
• Individuals who already have a job with insurance lined up but still need a short-term solution.
• People with ongoing medical needs who are over the age of 50.
• People who have plans to become pregnant or those with pregnant spouses.
• Individuals who take expensive prescription medications.
• People with past or existing health problems.
• Individuals who can pay their premiums and do not want to make changes to their coverage.

For most people, COBRA is not meant to be a long-term solution.

How much does COBRA insurance cost?

As a general rule, COBRA coverage is considerably more expensive than a regular health insurance plan. That’s why most people use it only when necessary.

People who are thinking about applying for COBRA insurance should also analyze their budgets. It is worth knowing how much COBRA insurance costs because it helps people determine how much they need to allocate for health coverage. There are three steps to calculating COBRA costs.

1. COBRA Election Form 

Monthly premiums can be calculated using the COBRA election form. The form allows individuals to obtain information about the cost for each family member to maintain coverage. The amount for each family member enrolled in COBRA should be added and then multiplied by 1.02. A two percent administration fee should also be added.

2. Pay Stub

People who have a pay stub can also easily compute their COBRA health cost. The first thing to do is find the personal and employer monthly contributions to health insurance. These two numbers must be added together in order to obtain the premium’s full cost. The total amount should be multiplied by 1.02. The administration fee should also be added. The result serves as the final monthly premium cost.

3. Get In Touch With Former Employers

People without pay stubs or election forms should get in touch with their former employer to determine their monthly premium. It is important to specify which family members are signed up. It is also essential to find out whether or not the two percent administration fee has already been added.

How do people know if they can afford COBRA insurance?

Determining monthly COBRA insurance costs helps individuals find out whether or not this plan is for them. There are a few determining factors that people need to take into consideration such as their budget and current health needs. Before considering COBRA insurance, it is important to understand the different types of health insurance options.

It’s a good idea to look at some quotes for other types of health insurance options before you decide to enroll in COBRA.

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What are some alternatives to using COBRA?

There are several other options you can look into before you enroll in a COBRA plan. Since COBRA can be quite expensive, one of these other options may be more affordable.

• Individual Health Insurance

This health plan option is ideal for people looking for full PPO health insurance or HMO coverage. It comes with different price points and varying coverage levels.

• Private Family Health Insurance

This plan is best suited for families interested in getting comprehensive coverage from an HMO or PPO. This includes ongoing, preventive, and even emergency care. This type of plan resembles company-sponsored plans.

• Short Term Health Insurance 

These plans offer short-term coverage as the name suggests. The coverage is limited to emergencies, and the plans also have very high deductibles. People who apply for these plans can cancel at any time.

• Catastrophic Health Insurance

These plans are also referred to as emergency plans. They have high deductibles and are ideal for people who want to get their medical emergencies covered.  In spite of having high deductibles, they are affordable in most cases.

• High Deductible Health Insurance

These plans have a very high deductible before the coverage starts. However, they have very low-cost premiums. People who take this option will have to pay for their ongoing medical needs out of pocket.

• Pre-existing Condition Insurance

The plan is intended for individuals with preexisting conditions. This provides lower insurance costs than COBRA. In order to qualify for the plan, it is important to comply with the state’s requirements.

What should I know about COBRA and COVID-19?

In response to the coronavirus pandemic, the U.S. Department of Labor (DOL) and the IRS extended the deadlines for the enacting of COBRA benefits.  The extension is to remain in place for as long as the government continues to declare COVID-19 a National Emergency.

You can use your COBRA benefits, as long as you meet all of the qualification requirements if you have lost your job (and as a result your health insurance) during the pandemic.

Before you pay for COBRA, see what other health insurance options are available to you. Enter your ZIP code to compare rates now.

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