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How to Cope Without COBRA
The new health reform law did not extend COBRA eligibility or the subsidy that helped laid-off workers pay for COBRA health insurance. Here's how they can find an affordable policy.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
March 29, 2010
Editor's note: There’s good news for people who have been laid off recently. After several extensions, the COBRA subsidy was scheduled to expire for newly laid-off people on March 31, 2010. But Congress has okayed another extension, to May 31, 2010, for providing the 65% COBRA subsidy to people who are newly laid off. The subsidy lasts for up to 15 months.
Does the recently passed health-care bill include a provision to extend the COBRA eligibility period beyond 15 months through 2013?
The original House bill would have extended COBRA coverage until 2014, when insurers will be prohibited from rejecting people for preexisting conditions and individuals and small businesses will be able to buy coverage through insurance exchanges. But the version that was signed into law did not include that provision.
COBRA is the federal law that lets you keep health-insurance coverage through your former employer for up to 18 months after you lose your job. People who were laid off starting in September 2008 and haven’t found new jobs with benefits are exhausting their 18 months of COBRA eligibility and can no longer keep that coverage.
Meanwhile, the COBRA subsidy is also set to expire at the end of March. This subsidy pays 65% of COBRA health-insurance premiums, which can be twice as much as your insurance premiums when you had a job and your employer covered part of the cost.
The COBRA subsidy, which was first paid out in February 2009, has been extended several times. In its current form it is set to last for up to 15 months for people who lose their jobs between September 1, 2008, and March 31, 2010. People who have already lost their jobs can continue to receive the subsidy for up to 15 months (although they can no longer receive the subsidy if they’ve already exhausted their 18 months of COBRA eligibility). Unless the subsidy is extended again, people who lose their jobs after March 31 will not qualify for the subsidy. See the Department of Labor’s COBRA continuation coverage for frequent updates about the status of the subsidy.
If you’re still eligible for COBRA but no longer qualify for the subsidy, your premiums will nearly triple -- you’ll go from paying 35% of the premiums to 100% of the cost. In that case, compare the cost of your full COBRA premiums to the cost of buying an individual policy.
If you’re healthy, you may find a better deal on your own. You won’t be able to buy coverage through the health-insurance exchanges until 2014, but you can still get price quotes from several insurers and buy a policy through eHealthInsurance.com or find a local agent through the National Association of Health Underwriters. Many state insurance departments also include a list of insurance companies that sell policies in your area and consumer guides to help you select a policy.
A few consumer protections in the new health-reform law help insurance buyers now: Insurance companies can no longer impose a lifetime limit on the dollar value of coverage and cannot rescind coverage except in cases of fraud.
If you lost your job more than 18 months ago, you won’t be eligible for COBRA at all, no matter what happens with the subsidy. If you’ll be exhausting your COBRA eligibility soon, start looking at your alternatives now.
Those with health problems may still have a tough time finding an affordable policy on their own. Even though health-care reform has passed, insurers can still reject you for preexisting conditions until 2014 . But the new law does appropriate $5 billion to establish a temporary, national high-risk pool to provide coverage for people with health issues, starting June 23 (90 days after the law was signed) and remaining in effect until 2014. See Make the Most of Health Care Reform for more information about the high-risk pools.
If you will exhaust COBRA before June 23 -- or don’t qualify for the national high-risk pool after that -- it’s important to check with your state insurance department about its rules for extending coverage after COBRA expires. Most states already have high-risk pools or require insurers to provide continuation policies for people with health issues after their COBRA coverage terminates. Also see CoverageForAll.org for more information about the options available in your state.
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Reader Comments (6)
Posted by: A.R. at 03/29/2010 05:04:01 PM
I am 67 years old and still working full time with a very good health insurance policy through my employer. I will be retiring soon and will be eligible for Medicare. However, my wife, who has a several pre-existing conditions, will only be 63 1/2 years old at the time of my retirement. Is it possible for me to get Medicare but utilize COBRA to keep my present insurance for my wife for 18 months until she is eligle for Medicare?
Posted by: Amateur Economist at 03/30/2010 03:50:40 PM
You stated that people with pre-existing conditions will have a hard time getting insurance until 2014, but one of the provisions is: Immediate Access to Insurance for Uninsured Individuals with a Pre Existing Condition. Provides eligible individuals access to coverage that does not impose any coverage exclusions for pre]existing health conditions. This provision ends when Exchanges are operational. I haven't seen how this will work yet, and it may not be a very affordable option, but the new law is supposed to guarantee access to insurance for people with pre-existing conditions.
Posted by: To A.R. at 03/30/2010 03:52:28 PM
To A.R., You can e-mail Kim directly if you meant to direct that question to her rather than the broad audience that reads her column. Her email is at the bottom of the article.
Posted by: Kim Lankford at 03/31/2010 07:28:24 AM
Hi, Kim Lankford here, author of this column. To Amateur Economist...People with preexisting conditions can still be rejected by private insurance companies until 2014, but the new law appropriates $5 billion dollars to create a national high-risk pool that can help provide coverage for eligible people with health issues until the law changes in 2014. This high-risk pool must be up and running by June 23, and the Department of Health and Human Services is working on the details now. States that have srong high-risk pools may be able to continue running their plans, and new law will make a particularly big difference for people in states like Florida, Arizona and Nevada, which don't have open high-risk pools. The law specifies that the national high-risk pool will be available to people who have preexisting conditions and who have been uninsured for at least six months. But people who have not been uninsured for six months may fall through the cracks. Unlike the new federal plan, many states currently do not require you to be uninsured for six months before you are eligible for their high-risk pool, and some offer continuation policies that provide immediate benefits for people who have health issues and are about to exhaust their COBRA benefits. It is important to contact your state to find out about its consumer protections for people with preexisting conditions, especially as the details of the national high-risk pool are being ironed out. I wrote a column that goes into a lot more detail about the new high-risk pool on March 25 (see www.kiplinger.com/columns/ask/archive/make-the-most-of-healthcare-reform-.html). I hope this information helps.
Posted by: todd at 03/31/2010 11:52:36 AM
This is very informative. Well, how about if i transfer to another employer? Is my insurance from my former employer still (in effect) up to 18months even if I have a new employer already? Enlighten me please.
Posted by: Tom Shoff at 04/05/2010 06:01:44 PM
My spouse is working to maintain her health insurance. If she retires at age 62 or 63 can she obtain Cobra through her employer? The issue is, she doesn't want to work until 65. Part of reason is that I am retired (66) and part is her health issues make working beyond this time a burden.