To COBRA or not to COBRA, this is a frequent question.

Posted by Phil Dougherty
July 21, 2016

First, COBRA is not health insurance. COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that governs how and when a qualified beneficiary can continue terminated group health insurance coverage for a specified period of time by self-paying the premium.  In short and in general, it’s a law that allows an ex-employee and /or their dependents to remain on the employer-sponsored group health plan for a period of time. When you leave employment you are mailed a COBRA Election Notice that includes all of the dates, deadlines, and rules for making an election. To learn more about COBRA, visit:

Prior to healthcare reform, private Individual and Family Plan (IFP) health insurance was a popular alternative to electing COBRA primarily due to the premium savings. Group plans being typically richer in benefits were often much higher in premium. Receiving the COBRA notice from the employer was often a shock to the ex-employee, but premium relief could be found in the IFP market. As an active employee, this is camouflaged by the fact the employer is paying a good portion of the premium if not all of it. With COBRA, the ex-employee pays 100% of the premium plus 2% administrative cost.  So saving $500 a month or more in the IFP market was not unusual. Now, post-ACA, the COBRA notice is still a shock, but unless one qualifies for premium subsidies (found through CoveredCA, the public exchange), generally speaking, the individual/family market isn’t the bastion of savings it once was. Here are just some of the reasons for this: fewer options in the higher deductible/lower premium plan offerings, guarantee issue (no pre-existing condition restrictions), and mandated essential benefits that all plans must cover.

With premium savings being diminished there are advantages in maintaining group coverage under COBRA. PPO-style plans in the group market often have larger provider networks …even within the same carrier. For example, Blue Shield uses a smaller provider network for their IFP PPO plans than they do in their group plans. A doctor could be In-Network in a Blue Shield group plan, but out-of-network in a Blue Shield individual plan.

Also, because COBRA is a continuation of the same coverage you had as an employee, your coverage will stay the same*. That includes full credit for any deductibles that have been satisfied, out-of-pocket maximums, etc. for that calendar year.  Remember, in most cases plan deductibles and out-of-pockets run on a calendar year basis.  Starting an individual plan would mean starting a deductible and out-of-pocket maximum over again during a plan year. For example, if you left a job June 30, you could continue coverage under COBRA July 1. If you decide not to elect COBRA but enroll in an individual plan July 1, you would start over with a new set of calendar year benefits as well as deductibles and your out-of-pocket with just half the year remaining. And, it all starts over again January 1 of the next year. Staying on COBRA could save you money in out-of-pocket costs.

For an employee leaving a company with employer-sponsored group insurance, there are certain times when they can enroll in individual coverage: when their group plan ends, when COBRA benefits are exhausted, or during open enrollment (Nov. 1 through January 31). They would have 60 days from when your group plan terminates or when COBRA is exhausted to enroll in individual insurance.

If you have left a job and are considering COBRA, or are planning on leaving employment, contact your benefits department or insurance carrier to learn more about your specific COBRA options and costs. To learn more about individual plan options and costs, give us a call!

*While under COBRA, if premiums for your plan change, or if the employer sponsoring the plan makes a plan change or carrier change, you will be treated the same as an active employee and any changes will affect you as well.

Phil Dougherty