Short Term Health Insurance vs. COBRA Health Insurance
Which is better short term health insurance or COBRA insurance? Let us dive deeper and compare the two in this article.
What is COBRA Health Insurance?
Consolidated Omnibus Budget Reconciliation Act (COBRA) is a law passed by the US Congress, giving eligible employees and their dependents the continued benefits of health insurance coverage. This is after an employee loses their job or experiences a cut in their work hours.
Companies in the US employing 50 or more full-time workers need to provide health insurance to their employees by paying a chunk of their insurance premiums. However, if an employee gets laid off or falls below a minimum threshold number of work hours per week, the employer may stop paying its share of the health insurance premiums. This is where COBRA comes in. It enables an employee and their dependent family members to keep the same health insurance coverage for a certain period of time, but they should be willing to pay for their own.
Under COBRA, former employees and dependents are offered the option to continue their health insurance coverage at group rates, which would be canceled otherwise. Although these individuals are likely to pay more for health insurance coverage through COBRA than they did as employees (since they will solely pay the full premium costs), COBRA coverage might be less expensive than an individual private health insurance plan.
COBRA may cover the costs of prescription drugs, dental treatments, and vision care.
How to Qualify for COBRA Health Insurance
There are various criteria for each individual eligible for COBRA. How do you know if you qualify?
- You should have been engaged in a job and covered under an employer’s group health plan.
- Voluntary or involuntary job loss (you have been laid off, fired, retired, or quit)
- You had your work hours reduced that your employer is no longer required to cover you under a group health plan.
If you’re a dependent spouse or child, you will qualify for COBRA coverage if the covered employee lost the coverage because of the reasons mentioned above. However, you may lose coverage if:
- The employee is becoming eligible for Medicare.
- The employee passed away.
- You’re getting divorced or legally separated from the covered employee.
- You’re a young adult and you’re losing your dependent child status
COBRA Health Insurance versus Private Health Insurance
Here are some things to keep in mind when deciding if COBRA is for you.
How much is the monthly premiums?
When you opt for COBRA, you have to pay the full cost of the health plan (including your employer’s part, which tends to be the majority of the total cost), plus a 2% administrative fee. Meanwhile, if you choose to pay for a private health insurance plan, your premium will be based on your income.
How much have you paid towards your out-of-pocket maximum under your employer’s plan?
Moving to a self-purchased plan will require you to start over at $0. But if you’ve only spent a small amount or nothing at all on out-of-pocket costs, there won’t be a big issue.
Are your medications included in the covered drug list of the available individual market plans?
You don’t have to immediately decide if you want to continue with your health plan with COBRA. You are given a 60-day window in which you can choose whether or not to elect continuation coverage. It starts on the day you get the COBRA notification or the day that your employer-sponsored coverage stops.
What is Short Term Health Insurance?
Short term health insurance is an ideal alternative to COBRA health insurance. The former lets you sign up right away with coverage starting as early as the next day. Also, temporary health insurance is very much affordable, and there are a lot of available short term medical insurance plans in the market now.
However, short term health insurance policies don’t cover pre-existing conditions, maternity, mental health, and many other circumstances. Short term health insurance is medically underwritten, so based on the screening questions, you can either be accepted or declined for coverage. Short term health insurance is a good choice if you are young and healthy, and if you feel that the coverage provided in a short span of time is sufficient. This can save you some money in insurance premiums.
Which insurance is suitable for your situation?
COBRA provides you with the same policies you had under your employer. If you will be out of a job for an extended period of time, COBRA allows you to continue seeing your same doctors and receiving the same benefits. In the end, it may be helpful to compare options, such as short term health insurance plans.