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Losing COBRA Subsidy for Health Insurance

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As of the writing of this article, there is still no decision from Washington as to whether the COBRA health insurance subsidy will be extended for those who lost jobs or were laid off.

There is talk that Congress might extend the subsidy for an additional 15 months, assuming those who qualified have not already exhausted their benefits.

How Much and How Long is the COBRA Subsidy?

Currently, the health insurance subsidy pays 65% of the cost of the insureds former premium.  If new legislation is not passed, then the insured will be responsible for the total amount of their share of their former employer’s premium – plus a small administrative fee.  Thus, the premium for the insured will triple and may no longer be affordable.

Even if Congress decides to extend the benefit, it is important for those who are relying on COBRA to understand its limitations.  In all forms, COBRA health benefits are temporary in nature.  If your former employer had 20 or more employees, then the coverage limit is 18 months.  Thus, if the temporary subsidy is renewed, the insured will still lose health insurance benefits after a year and a half.

What Happens When COBRA Runs Out?

Many are taking advantage of the government subsidy, but when it either runs out or the insured reaches their 18 month limit, it is wise to search for new coverage.  A suitable option for most will be to explore policies in the individual and family health insurance marketplace.

Carriers such as Anthem Blue Cross, Assurant Health, Aetna, Medical Mutual, and United Healthcare all offer inexpensive coverage options.  And when compared to unsubsidized premiums, individual and family plans are almost always much more affordable.

Underwriting will be required and at this point carriers can still decline insurance coverage based on preexisting conditions.  For those that are in good health, it might be wise to explore their options before they lose the COBRA subsidy.  Healthy individuals might sacrifice their window of opportunity to purchase permanent coverage while taking advantage of this temporary, subsidized period of time.

Other Health Insurance Options

There will be some who cannot find individual coverage when their COBRA plan is exhausted. The uninsurable should contact their State Department of Insurance and research any available options. Most states offer a high risk pool (or something like it) for those who cannot purchase insurance elsewhere. Limited benefit plans are another option, but may not provide robust enough coverage for those who need it most. Eventually, health care reform should make it easier for high risk individuals to purchase coverage.

In summary, COBRA benefits are temporary and allow for a significant period of time for individuals and families to find new health insurance coverage. Consumers may be able to enroll in a group plan with a new employer or purchase a policy in the individual market. Those who cannot find suitable coverage should contact their Department of Insurance to explore all available options.

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Category: Health Insurance