By NerdWallet Health health finance expert Christina LaMontagne
Question:
I recently lost my job when my company decided to downsize. I was shocked to receive information on continuing my health insurance through COBRA. In order to keep the same coverage I have under my employer, I’ll have to pay more than three times as much in premiums. Why is it so expensive? Are there other options available outside of COBRA?
Answer:
Losing your job is difficult enough without having to worry about high insurance premiums. But, with COBRA, that’s usually what you’ll get.
COBRA allows workers to continue the healthcare coverage they previously had under an employer. This healthcare provision was passed in 1986 under the Consolidated Omnibus Budget Reconciliation Act. Though the idea of allowing individuals to continue coverage under a group plan they would otherwise not qualify for is nice, it isn’t always cost effective.
COBRA is so expensive because you are paying the entire health insurance premium. When you were working, your employer was likely covering some (if not all) of the cost. Now, you are responsible for the whole premium. In addition, COBRA can charge an extra 2% in administrative costs.
Fortunately, there are several other health insurance options.
One alternative to COBRA is finding a health insurance provider through the Marketplace established under the Affordable Care Act. Healthcare.gov can direct you to your state’s Marketplace, or if they don’t have one, allow you to compare policies on the national site.
You can also compare policies and providers directly online through a health insurance tool or even by speaking with an agent.
One limitation to purchasing an Affordable Care Act plan is that, under most circumstances, you can only do so during the annual open enrollment period (this year, open enrollment occurs from November 15, 2014–February 15, 2015). However, your job loss could qualify you for enrollment outside of the annual open enrollment period. You’ll have to apply to see if you qualify.
Finally, if you have considerably limited assets and income, you could qualify for assistance through your state’s Medicaid office.
COBRA is only one of many options for health coverage after a job loss. Each policy you look at will have different features along with varying costs. To avoid being stuck with unexpected medical debt, make sure you always read the fine print and look at details such as doctors and hospitals covered in the network, deductibles, exclusions and copayments.
NerdWallet Health helps patients reduce their medical bills—get started at health.nerdwallet.com. Have a question for Christina? Submit it to AskChristina@nerdwallet.com.