COBRA vs. Marketplace Insurance
Getting health insurance coverage when navigating a job change can be difficult. You may go with COBRA coverage or decide to purchase a marketplace plan. With all of the different benefits out there, distinguishing which option is right for you may be challenging. When it comes to cost, marketplace plans are usually more favorable. However, choosing COBRA may be a better fit for those with pre-existing medical conditions.
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COBRA vs. Marketplace Insurance
In the midst of a job change, finding optimal health coverage should be a top priority. You never know when an unforeseen health circumstance could lead to high medical costs. There are typically two routes that you may consider if you are between jobs: COBRA and Health Insurance Marketplace (HIM) plans.
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act and is a law, not a company. This law allows workers and their families to continue to use group health benefits from their previous health insurance plan for a limited amount of time due to unexpected circumstances. Events that make you eligible for COBRA may include:
- Sudden job loss (voluntary or involuntary)
- Transitioning between jobs
- Certain life events
- Reduction in working hours
Coverage may also be offered to children who no longer have dependent status or retirees who do not yet qualify for Medicare.
In order to apply for COBRA, the company you worked for must employ over 20 people, and you must have been using their group health insurance plan. Some states offer Mini-COBRA for companies that have 19 or fewer employees. Once your situation is determined as a ‘qualifying event,’ you are eligible for coverage ranging from 18 to 36 months. Your employer is required to notify employees of their rights to apply for COBRA within 44 days of losing coverage.
Health Insurance Marketplace (HIM)
The Health Insurance Marketplace (HIM) is another option for those who have recently lost health insurance coverage due to unplanned situations. Marketplace plans meet the minimum essential coverage, such as the essential health benefits listed by the Affordable Care Act (ACA). There is an open enrollment period for Americans to opt into marketplace insurance and purchase a plan each year. However, like COBRA, there is a special enrollment period if you experience a qualifying life event. You may be eligible for a special enrollment period if you experience any of the following:
- Change in residence
- Become a U.S. citizen
- Leave jail or prison
- Change in household structure
- Lose a job
- Loss of eligibility for Medicare or Medicaid
- And more
The special enrollment period will last around 60 days after the qualifying life event happens, which is similar to COBRA. Once you miss the deadline, you are required to wait for the next open enrollment period to begin a new plan.
Is COBRA or Marketplace Insurance Better?
COBRA and HIM plans have several pros and cons, so it is important to carefully consider each option before deciding which plan is best for you. Below we explain some of the benefits of getting coverage through the HIM and COBRA.
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Benefits of Getting Coverage Through The Healthcare Insurance Marketplace (HIM)
In general, COBRA tends to be more expensive than HIM plans. Even though you are eligible to receive the same insurance that you had through your employer, you are now responsible for paying the entire premium cost. This means you will have to pay the part of your premium that was previously paid by your workplace. In addition, you are required to pay a 2% COBRA administration fee. On average, COBRA typically costs $599 a month. However, this cost may be reduced for those who have lost health coverage due to reduced working hours, which is referred to as COBRA premium assistance.
In comparison, HIM plans cost around $462 per month on average, although this will vary depending on the type of plan. When purchasing an insurance plan, you can choose between different ‘metal tiers.’ These tiers differ in the cost of their monthly premium and the yearly deductible. Most people go with silver plans, as they lie relatively in the middle. Many people qualify for government subsidies to help pay for their monthly insurance, bringing the cost down to $48 on average. Around 80 percent of people will be eligible for these subsidies.
Therefore, if the two options have similar coverage, but the ACA plan is cheaper, it may be the better option for you.
Benefits of Getting Coverage Through COBRA
In some scenarios, you may meet your insurance plan’s yearly deductible before losing coverage. In this case, signing up for COBRA rather than picking a new plan would be ideal. You would have fewer out-of-pocket costs for the rest of the year with your previous plan if you already met your annual deductible.
Similarly, sticking with COBRA would be more beneficial than choosing a HIM plan for those with medical conditions that require frequent visits with a health care provider. A new plan may mean that you need to switch doctors in order to get in-network coverage. Sticking with healthcare professionals who know your medical history is often more favorable. Overall, it is often easier to go with COBRA if the costs are similar between getting a new plan and signing up for COBRA.
COBRA and HIM Frequently Asked Questions (FAQs)
Health insurance can be confusing, but we’re here to make it easier. Below are the answers to some frequently asked questions about COBRA and HIM insurance.
What is the deadline to enroll in COBRA?
After your last day of work (or health insurance coverage), your employer will have 44 days to provide information to you about enrolling in COBRA. After your employer gives you information about COBRA, you will then have 60 days to enroll.
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Can I save money by delaying COBRA enrollment?
Delaying your enrollment in a COBRA plan will not save you any money. COBRA is retroactive, and therefore you will be responsible for paying the premiums you missed while delaying coverage. It is best to sign up almost immediately after your benefits end so that there is no gap in your health coverage.
Are COBRA and HIM my only options if I lose my job?
While many people who are unemployed decide to get coverage through the HIM or COBRA, there are several other ways to get coverage if neither of these options are a good fit for you. Some other ways to get coverage include short-term health insurance and health sharing ministries.
In addition, you may want to consider alternatives to health insurance, such as Mira. Mira provides access to urgent care visits, telebehavioral health, prescriptions, and lab tests for only $45 per month. Unlike traditional insurance plans, you do not need to meet a deductible with Mira and can commit on a monthly basis.
Can I change from COBRA to an HIM plan?
There are only certain situations when you may be able to switch from COBRA to an HIM plan. Suppose your COBRA coverage runs out, or you lose a government subsidy. In that case, you will be able to enroll in an HIM plan regardless of whether there is an open enrollment period since this qualifies as a special enrollment period. If you choose to end your COBRA coverage early, you will only be able to buy a new plan if there is currently an open enrollment period, which is typically from November to January.
How do you qualify for marketplace subsidies?
To qualify for a government subsidy, also known as a premium tax credit (PTC), you need to have a certain household income. In all 50 states, the income must be between 100 and 400 percent of the federal poverty level. If your income is above that level, you may still qualify for other discounts.
Choosing a health insurance plan is essential for the overall health of you and your family members. If you lose your job or have another life-changing event, your health coverage may stop, and you’ll need to find a new plan. Both COBRA and Health Insurance Marketplace (HIM) plans are available for you to purchase. COBRA is an excellent option for those with preexisting medical conditions or people who have already met their deductible for the year. HIM plans are typically cheaper and may be a better option for those trying to cut costs.
If you can’t find a plan that’s right for you, there may be other options available as well. An affordable health insurance alternative is Mira. For as little as $45 a month, Mira members get access to low-cost virtual and urgent care, up to 80 percent off over 1,000 different medications, and same-day lab testing. See if Mira is right for you; sign up today.
Talor graduated from Penn State University with a B.S. in Biobehavioral Health, and minors in Spanish and Diversity & Inclusion in May of 2022. She has a passion for health equity and diversity in health. In the future, Talor hopes to work in public health policy reform to help eliminate health disparities. She enjoys reading, cooking, and listening to podcasts in her free time.