HELP!! MY COBRA SUBSIDY IS SET TO EXPIRE!!!

Right now, many individuals are at a crossroad when it comes to their health insurance.  During this exasperating recession, people found themselves laid off from their jobs suddenly, and, in a scramble, elected to stay on their former employer’s health insurance plan through COBRA instead of finding alternatives to COBRA health insurance.

COBRA, Consolidated Omnibus Budget Reconciliation Act, is a law that requires employers to offer continuation of the health insurance coverage offered by their former employer in the event of the employee’s involuntary termination from his job.  COBRA health insurance is temporary, usually for a period of 18 months, and the premiums due under the COBRA medical plans are the responsibility of the individual, not the employer.  This means that the individual pays both his employee share and the employer share of his and his family’s health insurance.  That usually makes COBRA premiums very expensive, but often an individual that has just lost his job does not think he has any other option, other than lack of health insurance.

Congress was aware of this burden on individuals, and accordingly, in February of 2009 President Obama signed a law subsidizing COBRA, as of The American Recovery and Reinvestment Act.   This law was set to expire December 31, 2009, but was briefly extended to for individuals that were laid off prior to May 31, 2010, for a period of 15 months of subsidy.

This subsidy was a significant relief to people who needed insurance after they were laid off from their jobs, because, again, COBRA health insurance premiums are very expensive for individuals, require a 2% administrative fee, and continued participation in an employer sponsored plan.  These facts have always made COBRA an unattractive option for individuals needing insurance, but the COBRA subsidy alleviated the burden of the expensive premiums for COBRA by subsidizing 65% of that premium.  HOWEVER, the COBRA subsidy is running out for individuals originally receiving it, and no longer available to individuals laid off from their jobs after May 31. 2010.

This means that if you have been enrolled on COBRA for some time or if you have lost your job after May 31, 2010, there is no subsidy available for electing COBRA.  To put it plainly, it is time for you to make a choice for yourself and the family covered under your health insurance plan.  You can:

1)    Continue coverage under COBRA and pay the expensive premiums

2)    Let your medical insurance lapse and have no health insurance at all

3)    Join your new employer’s health insurance plan

4)    You can purchase your own private health insurance plan, as an individual.

So, weigh your options….

Option 1 – continue coverage under COBRA

COBRA is a fine band-aid, especially when subsidized, but COBRA offers you and your family no permanent solution.  Even subsidized it is temporary and lapses after 18 months, at which point you will have to decide between no insurance or your own insurance, unless you are able to join your new employer’s plan.

COBRA is continued coverage under your employer’s plan.  This is a plan that you did not design, and was not intended to serve your family alone.  Accordingly, you may be paying an expensive premium for insurance options that you do not need individually, but were necessary as part of a group plan.

Option 2 – let your medical insurance lapse and have no health insurance

The idea of being without insurance in the event of an accident or unexpected illness does not seem like a wise choice for any individual or his family, especially children.  Unfortunately, too many people find themselves on the receiving end of some very bad news from their doctor.  Such news is, inevitably, far worse when treatments, prescriptions and doctors recommendations cannot be followed because of a lack of insurance.

Health reform is underway, but there is not expected to be a concrete government plan available to individuals for some time.  And what the plan will look like is to be determined.  With so many unknowns, waiting for government-sponsored insurance is not feasible.

Option 3 – join your new employer’s health plan

This is often the most economical, and certainly what most people hope to do, but with unemployment in California hovering at almost 12%, you might not have gotten a job yet.  Or, you may have gotten a job in a different field that does not offer health insurance.  Maybe you have been doing freelance work and you find yourself enjoying it, would like to continue, but need a permanent solution for the health insurance needs of yourself and your family.

One of the few silver linings in the cloud of unemployment is that you are free to explore other opportunities, try out a different career.  Health insurance needs should not dictate where you work or what you do.

Option 4 – purchase your own private insurance plan

This option has never been more affordable or widely available.  Many people are not aware that it is even an option, but it is.  There are many benefits to having your own insurance.  It can be tailored to each individual and each family.  Maybe you have no need for maternity, you don’t need prescription coverage, your children are off to college and can be covered under their own plans….the possibilities are as individual as the person choosing them.  And, once in place, the coverage is generally permanent, regardless of your employment status.

The rates of individual insurance fluctuate greatly, depending on individual needs, but in general they are cheaper than group insurance rates, and are almost always cheaper than COBRA.

It is advisable to anyone facing a decision about their health care to shop for individual insurance plans.

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