Losing a job affects your income and also leads to the loss of vital benefits, including health insurance. But the federal government’s COBRA (Consolidated Omnibus Budget Reconciliation Act) health insurance program enables you to continue your employer-sponsored health insurance until you start a new job or obtain another health insurance policy. COBRA offers continuation of all your health-care coverage, including your dental plan. Even so, choosing the best direction forward requires understanding how COBRA works, as well as other health insurance options.
What Is COBRA Coverage?
The Consolidated Omnibus Budget Reconciliation Act of 1985 enables you to continue your company-sponsored health insurance if you resign your position, your employer terminates your employment without cause or if you lose your coverage due to a reduction of work hours. The law applies to employers with at least 20 full-time personnel. COBRA health insurance allows you to extend your health benefits for up to 18 months, or 36 months if you are disabled.
How Much Does COBRA Cost?
COBRA serves as a stopgap to protect you and your family until you can obtain coverage in a new job or purchase health insurance on the market. Often, the employer that sponsors the health insurance will discontinue its contribution once your COBRA coverage begins. In other words, if you decide to extend your coverage through COBRA, you likely must pay the entire premium, plus 2 percent of the premium for COBRA administration. On average, employers pay 69 to 82 percent of their employees’ health insurance premiums, according to a Kaiser Family Foundation survey, so continuing coverage through COBRA can greatly increase your out-of-pocket health insurance costs.
Does COBRA Include Dental Coverage?
COBRA enables you to keep your entire health insurance plan for the allowable period. If your plan includes medical, vision and dental coverage, you could maintain all three benefits through COBRA. However, if your employer-sponsored insurance does not include dental insurance, you cannot add the benefit through COBRA. Your copayments and deductibles remain the same through COBRA dental insurance. COBRA does not apply to disability or life insurance coverage.
Affordable Care Act Marketplace vs. COBRA
The Affordable Care Act (ACA), often referred to as Obamacare, passed in 2010. Designed to offer affordable health care to individuals and families at all income levels, ACA coverage is available to anyone who does not otherwise have health insurance. Faced with the loss of employer-sponsored health insurance, ACA might provide you an alternative to COBRA health insurance. However, ACA and COBRA have different provisions, which require careful consideration before you select coverage.
ACA enables individuals and families to shop for health insurance in the Health Insurance Marketplaces, accessible online at Healthcare.gov. The Marketplaces feature health insurance plans offered by various insurers. Each state organizes its own Marketplace, and health plans vary from state to state. ACA plans determine your premium costs based on how your family’s income compares with the federal poverty level. For instance, if you have a family of four with a household income totaling three times the federal poverty level, you likely will pay less than the same sized family earning four times the federal poverty level. In some cases, the government subsidizes ACA coverage for low-income households.
COBRA enables you to continue coverage from your employer-sponsored plan, so you can keep your existing doctors. Essentially, choosing a Marketplace plan means starting over with new coverage. Because health-care plans have unique in-network lists of doctors and dentists, there is no guarantee that you can find ACA coverage that will enable you to keep your current physicians.
Continuing coverage through COBRA likely will require you to foot the bill for the entire premium. But while a Marketplace policy might cost less than COBRA health insurance, it might have higher copayments and deductibles than your COBRA coverage.
COBRA and ACA have strict enrollment requirements. To continue your employer-sponsored insurance, you must apply for COBRA within 60 days of losing your coverage. When your COBRA coverage ends, you can immediately purchase a Marketplace plan, but if you terminate COBRA coverage early, you can only buy an ACA plan during open enrollment, typically in the fall. However, if you decide not to choose COBRA, you can purchase a plan in the Marketplace within 60 days of losing your employer-sponsored coverage. If your COBRA coverage overlaps with the ACA open enrollment period, you can purchase a plan in the Marketplace and terminate your COBRA coverage early.
Marketplace Dental Coverage
The Marketplace provides two ways to purchase dental insurance. You can select a comprehensive health plan that includes dental coverage, or you can purchase a separate dental plan. However, you must purchase dental insurance in conjunction with medical coverage, even if you choose separate dental and medical plans.
The Health Care Battle
Since its passage, ACA opponents have fought to weaken or completely abolish ACA health-care options. They seek to eliminate provisions such as government subsidies, coverage for the elderly and rules that require insurers to offer health insurance to people with preexisting health conditions. The same opponents also seek to reduce or eliminate some Medicare benefits, which could impact health care for seniors and disabled citizens. At the times of this writing, ACA opponents have not directly targeted COBRA for reform or elimination. If you face losing your employer-sponsored insurance, research the current political climate and seek advice from a health-care professional or financial adviser to determine your best coverage option.
- Federal Register: Health Care Continuation Coverage
- U.S. Department of Labor: FAQs About Affordable Care Act Implementation
- Kaiser Family Foundation: 2017 Employer Health Benefits Survey
- U.S. Department of Labor: FAQs on COBRA Continuation Health Coverage
- Merriman Wealth Management: COBRA vs. ACA
- NPR: Just Lost Your Job? COBRA May Be Your Best Health Insurance Strategy Now
- Healthcare.gov: Dental Coverage in the Marketplace