In 1986 the federal government passed legislation to protect individuals and families from suddenly losing their health insurance when they lost or quit their jobs. This legislation, known as COBRA Insurance, essentially allows someone to keep the health insurance they had at their previous company
for a specified length of time if they meet certain requirements and pay the full premium monthly. Normally you can continue your COBRA insurance for eighteen months under the federal law. There are also many state laws, known as mini COBRA laws that extend COBRA benefits to people who don’t qualify under the federal law because they work at companies with fewer than 20 employees.
Benefits of COBRA Insurance
There are many benefits of COBRA Insurance that can help you and your family during a tough time after losing or quitting a job. First and foremost, COBRA health insurance ensures that you will not experience a break in your coverage in which you have to pay expensive medical bills out of pocket or go without medical coverage. Equally important, using COBRA insurance to stay covered ensures you will not be denied from future health insurance plans if you have a pre-existing condition. Under current laws as long as you do not have a lapse in insurance coverage, you cannot be denied coverage in the future.
Moreover, COBRA medical insurance, allows you and your family to keep the exact same plan, which means you do not have to change doctors, hospitals, co-payments, or anything else. Your plan under the COBRA insurance law will be the exact same as it was with your employer.
Additionally, depending on your current health status, age, and lifestyle, COBRA medical insurance may be the most cost-effective health insurance for you and your family. If you have a previous health condition or fall under high-risk categories, keeping your health insurance with COBRA could be cheaper than finding private medical insurance.
Lastly, COBRA medical Insurance provides a great short term, easy way to stay covered. If you are confident you will find another job quickly where you will have health insurance, COBRA is the easiest way to stay covered for short time periods.
Disadvantages of COBRA Insurance
There are three main disadvantages to COBRA- cost, term length, and unexpected changes. Perhaps the greatest disadvantage to COBRA health insurance for most people is the cost. Since you have to pay the entire premium under the COBRA law, if can be extremely expensive to keep your entire family covered, sometimes over $1,000 a month. For most people recently out of work, this is far to expensive.
Secondly, COBRA health insurance is a short-term solution and eventually will run out. Under the current laws, COBRA insurance lasts for 18 months and at the end of that time you will have to find alternative insurance. For people who remain unemployed at the end of 18 months, this can be extremely difficult.
Finally, since COBRA insurance is just a continuation of your previous insurance, you are subject to any changes, cancellations, and rules of the policy. That means if your employer changes plans or the cost of the plan, it will change for you. It also means if your previous employer cancels the plan, you will also lose your health insurance. Additionally, if you move out of the coverage area, you may also lose.