For Employees: Seven Key Factors for Deciding Between COBRA Coverage & Marketplace Plans
Prior to the Patient Protection and Affordable Care Act (“PPACA”), you had a relatively simple decision to determine whether selecting COBRA was the optimal choice. Though an expensive one, COBRA was often the only viable alternative upon the end of your employer-sponsored health coverage.
As the PPACA celebrates its 5-year anniversary, and with the introduction of the Marketplace exchanges, the decision to elect COBRA upon loss of health coverage is now even more difficult.
When/if you lose your employer-sponsored health coverage (a “qualifying event”) you still have the same option to enroll in COBRA, or you can choose Marketplace coverage. This option is available because a loss of “minimum essential coverage” (MEC) occurred that allows for enrollment in a Marketplace plan outside of the Marketplace’s annual Open Enrollment period.
Make the best coverage decisions for you and your family by considering these seven key points:
- Age. Insurance carriers offering coverage at the Marketplace are limited by the available fee structure and, as a result, younger individuals are more likely to find Marketplace coverage less expensive than COBRA coverage. However, older individuals may find COBRA to be less expensive.
- Eligibility for Federal Subsidies. Individuals who qualify for subsidies in the Marketplace will likely result in lower premiums compared to COBRA coverage. Subsidies within the Marketplace are not available if you choose to elect COBRA.
- Coverage Availability. When an individual enrolls in COBRA coverage, there is no gap between coverage under the health plan as an active employee and the beginning of COBRA coverage upon enrollment/payment. COBRA simply begins the day after the group coverage ends. In the Marketplace, coverage can only begin on the 1st of the month, often the 1st of the month following enrollment. A small gap in coverage may not be an issue for some since pre-existing condition exclusions are no longer permissible, but even a gap in coverage for a few days can significantly impact certain individuals.
- Change in Provider Network. An individual that opts to enroll in COBRA will have a seamless transition and will continue with the same network providers. The health plans available at the Marketplace will likely force a change in network and participating doctors. While this may not be important to some individuals, opting to enroll in COBRA allows an individual to keep current medical providers and may provide more comprehensive coverage than a Marketplace health plan.
- Quality of Coverage. COBRA coverage may offer a more comprehensive benefit package over a Marketplace plan. In addition to the inclusion of dental and vision coverage, COBRA coverage may in fact result in less out-of-pocket charges despite higher premiums than those offered on the exchange.
- Timing of Enrollment. Generally, an individual has 60 days to elect COBRA coverage after a “qualifying event.” Upon an individual’s election of COBRA, the Marketplace special enrollment right immediately expires and is unavailable until the end of the COBRA coverage period. If you then fail to pay your COBRA premiums at a later time, you will not have the right to a new Marketplace special enrollment period.
- Planning for coverage. Furthermore, even though an individual can enroll in the Marketplace up to 60 days in advance of a loss in coverage, you may not be given advanced notice that you will lose coverage. Planning for Medicare eligibility or Retirement will likely allow an individual to timely plan for the transition of group coverage under the employer to Marketplace coverage. But, if terminated, you rarely have advanced notice and may face a gap in coverage, even if you sign up for Marketplace coverage immediately after the qualifying event takes place. COBRA coverage may be a viable alternative to address this short-term gap in coverage, if COBRA is elected after submitting the Marketplace application and terminated at the time coverage under the Marketplace plan begins.
With more options come more decisions. Choosing the right coverage once your employer-sponsored plan ends might seem stressful, but that doesn’t have to be the case. Use the above seven key points to make an informed decision when selecting COBRA or Marketplace health coverage.