Are there alternatives to COBRA?
There are three primary options to consider as alternatives to COBRA coverage. You may be able to enroll in coverage through:
A spouse’s or domestic partner’s health plan
Individual health insurance directly through an insurance company
Individual health insurance through the Marketplace/Exchange
Option #1: Spouse/domestic partner coverage
If you are married or in a domestic partnership, coverage may be available through your spouse or domestic partner if they are employed and have group health coverage. If a child is under age 26, coverage may be available through a spouse’s plan if they are employed and have group health coverage. This option may provide coverage at a lower cost since typically employers subsidize a portion of the premium for dependents. You have a right to enroll in a spouse’s group health plan coverage since you lost your group health plan coverage. You must exercise this option with your spouse or domestic partner’s employer within 30 days of your loss of your prior employer coverage, and in some cases, coverage will not have a retroactive effective date. Please note: not all group health plans allow coverage for domestic partners, so this option may not be available.
Option #2: Individual coverage direct with insurance company
Individual health insurance can be purchased directly through an individual insurance company. You may apply for individual insurance (in lieu of electing COBRA), but you must do so within a “special enrollment period.” Your “special enrollment” period is 60 days from the date you lose your employer group health coverage. After 60 days, your special enrollment period will end, and you will not be able to enroll in an individual plan until the individual plan open enrollment period. This occurs annually, typically in November for coverage starting on January 1st.
For more information about individual health insurance options, contact health insurance company(s) who specialize in the individual market.
Option #3: Individual coverage through Marketplace/Exchange
Individual health insurance can be purchased online through a Marketplace/Exchange in lieu of electing COBRA or after your COBRA coverage expires. If you apply for individual insurance in lieu of electing COBRA, you must do so within a “special enrollment period.” Your “special enrollment period” is 60 days from the date you lose your employer health plan coverage. You may apply for insurance or enrollment in individual insurance through the Marketplace at any time during that 60-day window. After 60 days, your special enrollment period will end and you may not be able to enroll until the Marketplace open enrollment period. This occurs annually, typically in November for coverage starting on January 1st.
If you elect COBRA, you can switch to a Marketplace plan during a Marketplace open enrollment period. If your COBRA coverage ends involuntarily, such as you exhaust the maximum COBRA coverage period, or if the employer no longer offers you health plan coverage, you may be able to enroll in the Marketplace through the special enrollment period outside of open enrollment. The end of an employer-sponsored COBRA subsidy may also be considered an involuntary loss of coverage, but this is not always the case. Please contact your state Marketplace directly to confirm if the loss of an employer-sponsored subsidy qualifies for a special enrollment period. In addition, if you have a “qualifying life event,” such as you get married or have a child, you can switch to a Marketplace plan.
Importantly, if your COBRA coverage is voluntarily terminated, such as failure to make a timely premium payment or by your request prior to the end of the maximum coverage period, you will not be able to enroll in a Marketplace plan until the next open annual enrollment. If you sign up for Marketplace coverage instead of electing COBRA coverage, you cannot switch to COBRA coverage under any circumstances.
Coverage through the Marketplace may cost less than COBRA. Federal subsidies made available through the Affordable Care Act may be available through the Marketplace if your household income is between 138% and 400% of the Federal Poverty Level. If you are eligible for a federal subsidy, the only way to get the subsidy is to be covered through the Marketplace. Being eligible for COBRA won’t limit your eligibility for individual coverage or for a tax credit if you enroll in coverage through the Marketplace in lieu of electing COBRA.
For more information about health insurance options available through the Marketplace, visit www.healthcare.gov or call 1-800-318-2596. If you live in California, contact Covered California at www.coveredca.com or 1-888-975-1142. For a full listing of Marketplace/Exchange information per each individual state, visit https://www.healthinsurance.org/state-health-insurance-exchanges/.
Factors to consider when choosing COBRA vs. another option
Instead of electing COBRA, other coverage options may be more affordable. It’s important that you choose carefully between COBRA and other coverage options, because once you’ve made your choice, it can be difficult or impossible to switch to another coverage option. When considering your options for health coverage, you may want to think about:
Premiums: Other options, such as coverage on a spouse’s plan or through the Marketplace may be less expensive than COBRA.
Provider Networks: You may want to check to see if your current health care providers participate in a network as you consider other options.
Drug Formularies: A change in your health coverage may affect your costs for medication and in some cases, your medication may not be covered by another plan.
Severance Payments: If your former employer is paying all or a portion of your COBRA premiums for a period of time under a severance agreement and you do not want to continue COBRA after the subsidy ends, you may have to wait until the next annual open enrollment period to enroll onto a spouse’s plan, an individual plan, or a Marketplace plan. This is because voluntary termination of coverage when your severance expires is not a qualifying life event under the HIPAA regulations that would trigger a special enrollment. Please contact your state Marketplace directly to confirm if the loss of an employer-sponsored subsidy qualifies for a special enrollment in your state Marketplace.
Service Areas: Some plans limit their benefits to specific service or coverage areas.
Other Cost-Sharing: You may want to check what the copayments, deductibles, coinsurance, and other amounts are for alternative health coverage options. If you change to other coverage, you may pay more out of pocket than you would under COBRA because the new coverage may impose a new deductible or a new out of pocket maximum mid-year.
Federal Premium Subsidies: If you may be eligible for a federal subsidy, you will want to consider securing coverage through the Marketplace in order to take advantage of potentially lower premium costs. The Marketplace is the only source for securing a federal subsidy.
Certificate of Group Health Plan Coverage
A Certificate of Group Health Plan Coverage is available upon request if you were enrolled on a medical plan. It provides evidence of when your group health coverage ended to help you access special enrollment in another plan, including the Marketplace. Federal law allows you to enroll in another group plan (such as a spouse’s plan) or in Marketplace coverage if you lose your group health plan coverage. The Certificate will make it easy for you to prove that you had other coverage and the date that coverage ended.