New COBRA Perils

New COBRA Perils as of April 1, 2014

COBRA is an important protection.  COBRA is the temporary extension of group coverage at one’s own expense when someone loses or leaves their job (and their dependents) or to a dependent losing group coverage due to aging off a parent’s plan, divorce or death of a spouse.
Until March 31, 2014, anyone electing COBRA could voluntarily terminate COBRA and apply for individual coverage.  THIS IS NO LONGER TRUE.  One can decide to buy individual coverage during the annual open enrollment period which begins November 15, 2014 for a January 1, 2015 effective date and terminate COBRA to coincide with new individual coverage.  But outside of the annual enrollment period, there is no special enrollment period provided by terminating COBRA.  Outside of the annual enrollment period, only exhausting COBRA benefits creates a special enrollment opportunity.

What Are the Implications of this Change for those Considering Electing COBRA?

You had better be sure the COBRA coverage is what you want because otherwise you will be stuck with it until the next annual enrollment period, which this year begins November 15th.  Losing your job, getting divorced or having your spouse pass away are qualifying events that will allow you to buy coverage in the individual market off-cycle before electing COBRA.  But, again, once you elect COBRA you cannot buy other individual coverage EXCEPT during the annual open enrollment period.

Which is Better – COBRA or Individual Coverage?

Which is better depends entirely on your circumstance and priorities.  COBRA coverage and rates vary widely.  We’ve seen COBRA premiums range from under $400/month to over $1200/month.   Of course, more expensive plans are typically associated with more comprehensive coverage.  Individual policy premiums can vary widely too.  For 2014 in New York where premiums are NOT age-rated, individual premiums were under $400/month for some Empire plans and close to $1000/month for Oxford/United Healthcare’s richest platinum plan.

How Should the Choice Be Made?

Get the facts or retain someone who will help you.  The problem is that many people who’ve enjoyed good group coverage their entire lives have no idea how to compare plans or shop for insurance and are shocked at how much coverage costs.  If resources are not a consideration, you can always elect COBRA if certain that the coverage is adequate.   But COBRA is by definition temporary so there should always be a plan regarding what coverage follows COBRA.  And, for entire groups of people, electing COBRA may be a foolish decision.  In all but a handful of states, individual premiums are based on age and twenty-six year olds aging off a parent’s plan will likely pay more for COBRA than for comparable coverage in the individual market.  Twenty-six year olds who are unemployed or underemployed may qualify for subsidized coverage as a result of the Affordable Care Act and pay a fraction of what they would have paid for COBRA.

Each situation should be evaluated based on the local options and the individual’s circumstances.  Call us if we can help.