A Snake in the Grass? Choosing Between COBRA and Other Coverage Options After Leaving Employer Coverage

Today is my last day at Georgetown’s Center on Health Insurance Reforms. As I pack up my desk to make room for the new research associate, I bid farewell to my colleagues, my Politico Pro subscription, and of course, my Georgetown-sponsored health insurance. With an eye on the proposed legislation that would repeal major parts of the Affordable Care Act (ACA), I have had to carefully consider my coverage options after I lose both my employer plan and current source of income.

Leaving a job means making important decisions that could impact your health and your pocketbook, and most of us will face these decisions multiple times over the course of our lives. While over half of the non-elderly population gets health insurance through an employer, the average American changes jobs about 12 times before they turn 50. These transitions frequently create gaps in coverage. Currently, the ACA allows folks like me who are losing employer coverage to access health insurance through the ACA marketplaces under a special enrollment period (SEP). And, thanks to the ACA, those marketplace plans can’t discriminate against me based on a pre-existing condition. I may even qualify for premium assistance or other subsidies to make that coverage more affordable – a big plus for those of us losing job-based income.

However, if I elect to use the SEP to enroll in a marketplace plan, my fate rests in the hands of an uncertain individual market. As the Senate contemplates a health care overhaul that is predicted to kick 22 million people off of coverage and President Trump threatens to cut off financial subsidies for marketplace plans, those of us choosing to enroll in the marketplace risk facing inadequate plan offerings, higher out-of-pocket costs, and increased premiums. Even without federal legislative action, insurer exits due to policy uncertainty generated by Congress and the Administration could leave some consumers in counties where no insurers are willing to participate.

While the individual market is a roll of the dice right now, I do have another option – a snake eyes, if you will – for more predictable coverage. Georgetown is required to offer me continued coverage under the Coordinated Omnibus Budget Reconciliation Act (COBRA), a federal law enabling enrollees to stay on their employer plan temporarily (usually up to 18 months) after leaving a job. Although the current Senate repeal bill and its twin sister passed by the House in May allow states to waive key consumer protections such as essential health benefits, COBRA coverage would permit me to hang on to my current benefits and provider network. For anyone undergoing treatment, that means COBRA will let you keep your doctors and avoid any interruptions.

The cost of COBRA, however, can be prohibitive. While job-based insurance plans are subsidized by a hefty employer contribution (on average, 82 percent of the premium cost), COBRA costs can run up to 102 percent of the group plan’s premium, and usually employees are required to foot the entire bill. Moreover, enrolling in COBRA disqualifies consumers from SEP eligibility for marketplace coverage, as well as federal financial assistance. So, if I elect COBRA, I cannot drop that coverage for a marketplace plan and if eligible, federal subsidies, until the next open enrollment, or until I’ve exhausted the coverage period.

Once my Georgetown coverage ends I’ll have up to 60 days to apply for marketplace coverage or to elect COBRA. If I use the SEP, I waive my right to elect COBRA and must cast my fortunes with the future of the ACA; if I choose COBRA, I’m locked into paying as much as $750 per month in premiums until at least the next open enrollment period. For many like me in this position, it’s an impossible choice, given the unknowns.

However, as a 24-year-old, I’m lucky enough to have a third option: signing up for my parent’s employer plan after my Georgetown coverage ends. One of the most popular provisions of the ACA allows young adults to enroll as dependents on their parent’s plan until they turn 26. Evidence suggestions that this provision has allowed several million young adults like myself to maintain coverage as they navigate academic and early career transitions.

For those 26 or older that are losing job-based coverage, think carefully about your options. While an offer of COBRA can cause some sticker shock, there is no second bite of that apple after the 60 days are up. And if you decide to forgo COBRA to enroll in the marketplace through an SEP, be aware that new pre-verification requirements will obligate you to provide documentation of losing employer-sponsored insurance within 30 days of selecting a marketplace plan. Regardless of your choice, given the latest proposal to impose waiting periods for folks who don’t have continuous coverage, avoiding gaps in your insurance is critical to protecting future access to insurance.

Ultimately, anyone leaving a job, aging off of their parent’s plan, or experiencing the many other life events that impact coverage will have to make a decision today about joining an insurance market that could look vastly different six months from now. With a Senate bill under consideration that reduces federal subsidies and strips away vital consumer protections, the shifting ground of the individual market could create major challenges for the millions of people who rely on marketplace coverage.

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