Losing your job can come with its fair share of headaches. You might have to start working part time until you can land another full-time job. You might also have to cut back on certain personal expenses to save money.
One thing you shouldn’t lose is your health insurance — and you’ll have some options to choose from. One could be COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act.1 Another could be shopping for an Affordable Care Act (ACA) plan. Both have their advantages, but you can only choose one.
How do you make up your mind? The decision may be easier than you think.
Besides this article, you can get help from a licensed insurance agent by calling one at 866-892-7324. They can talk to you about available health insurance plans
What’s the difference between COBRA and ACA?
It may seem like you’re wading through alphabet soup when you look at these two options. Start by understanding what each one is.
COBRA is a federal law that allows you to stay on your employer’s group health insurance plan at your own expense1, says Tasha Riggs, a licensed insurance agent based in Westminster, Colorado. It also covers your spouse and any dependent children if they were covered by your employer’s group health insurance plan and you choose to keep that coverage with COBRA.2
So let’s say you had a health insurance plan with doctors you really liked through your former employer. If you went with COBRA, that would allow you to stay on that same plan, with those same doctors, while you were looking for a new job.1
But COBRA is temporary. You can only stay on your original plan for 18 to 36 months.1
The most important thing to know about COBRA has to do with cost. You’ll pay the full cost of your monthly insurance bill (premium), including the amount your employer used to pay. (Many employers pitch in and pay a percentage of the cost of your health insurance premium while you’re employed.) You might also pay an additional 2% administrative fee3, says Katie Keith, JD, MPH. Keith is an associate research professor at Georgetown University’s Center on Health Insurance Reforms in Washington, D.C., who specializes in the Affordable Care Act and private health insurance. So COBRA could cost more than ACA healthcare coverage.
An ACA plan, on the other hand, is an individual health insurance plan that you can either buy through the federal Health Insurance Marketplace website (or a state version) or through a private insurance company. ACA plans meet the minimum essential coverage and other requirements set by the federal government. That includes benefits such as:4
- Emergency services
- Hospitalization
- Maternity and newborn care
- Mental health and substance use disorder services
- Prescription drugs
“People often think that there’s a government plan called ‘Obamacare’ or ACA and a separate private market, but there’s not,” Riggs says. “ACA is a law, not a healthcare policy. Every major medical plan has to comply with it.”
ACA plans come in several different “metal levels” — Bronze, Silver, Gold and Platinum. (A 5th option, catastrophic plans, are available to people under 30 and some with limited incomes.) Here’s a breakdown, based on cost:5
- Bronze plans have the lowest premiums, but you pay a higher share of costs (40% of the total cost of covered services). They have the highest deductibles. (A deductible is what you pay before the insurance company starts to pay for covered services.)
- Silver plans have moderate premiums and deductibles. You pay 30% of the total cost of covered services. Silver plans are eligible for cost-sharing reductions if you qualify based on your income.
- Gold plans have higher premiums but lower deductibles. You pay 20% of the total cost of covered services.
- Platinum plans have the highest premiums but the lowest deductibles. You pay 10% of the total cost of covered services.
Something that doesn’t cost anything: talking to a licensed insurance agent at 866-892-7324. They can walk you through available plans
COBRA vs. ACA: How do I decide between the 2 options?
Here are some things to think about when trying to figure out whether COBRA or ACA is better for you:
1. Consider the cost. “For most people who just lost their job, COBRA is too expensive,” Riggs says. ACA plans tend to be much cheaper than COBRA rates. “If your adjusted gross income fits the guidelines, you can get an even lower rate,” she says. That would be trhough a premium tax credit on ACA plans.6 How much lower depends on:6,7
- Who’s on your tax return (you, or you and a spouse)
- Who you claim on your tax return (dependents)
- Your adjusted gross income
- Your ZIP code
2. Check your deductible. When you switch to an ACA plan, your deductible will reset. But if you opt for COBRA, you’ll keep any progress you made toward your annual deductible while you were employed.
“Those deciding between COBRA and ACA coverage will want to consider how much they have already expended toward out-of-pocket costs, whether they expect to need additional care (or, say, have a chronic condition), and the time of year,” Keith says.
For instance, if you’re close to the end of the calendar or plan year, it might make sense to sign up for COBRA before shifting to ACA coverage. To figure it out, you’ll want to compare the cost of COBRA premiums for the rest of the year against the out-of-pocket costs with an ACA plan.
If you’ve met your deductible and are close to (or have reached) your out-of-pocket maximum, your remaining COBRA payments might be less than starting a new plan with a brand-new deductible.
3. Think about whether you’re open to switching doctors. “No matter what plan you have, you have to see if your doctor is in network,” says Riggs. Networks change regularly, so it’s important never to assume your doctors will be covered.
If you want to keep your doctors, make sure they accept the new plan you’re choosing. This is especially critical if you have ongoing healthcare needs or chronic conditions and need to maintain access to your providers for continuing care, Keith says.
4. Pay attention to timing. People who lose their job-based coverage generally qualify for a 60-day Special Enrollment Period, or SEP.8 That’s true even if you’re offered COBRA, Keith says. That means you have about 2 months to decide what to do.1,8
However, if you choose to enroll in COBRA, you have to stick with that plan until the policy ends or until the annual ACA Open Enrollment Period, says Keith. You can’t switch to Marketplace coverage simply because you want to drop COBRA coverage midyear.
So which should you choose?
The answer, of course, depends on your current situation, which includes everything from your family medical needs to who’s on your tax return. The good news? You don’t have to navigate the decision alone. If you need help weighing an ACA plan versus going with COBRA, a licensed insurance agent can help at no cost to you. Call one at 866-892-732 to compare plans
For informational purposes only. This information is compiled by HealthMarkets Insurance Agency and does not diagnose problems or recommend specific treatment. Services and medical technologies referenced herein may not be covered under your plan. Please consult directly with your primary care physician if you need medical advice.
