COBRA Alternatives

What to do if you have had a COBRA qualifying event

To be subject to COBRA you need to have been on a group health plan run by a company or organization for employees. The group plan should have 20 or more employees on more than 50% of its business days for the previous calendar year.

  • Anyone who was covered by the authorized group plan on the day before a qualifying event. This includes employees, an employee’s spouse or an employee’s dependent child. Basically if they were covered by a qualifying plan, they are also eligible for COBRA if they lose their health coverage through a qualifying event.
  • Your employer will notify plan administrators within 30 days of a qualifying event that relates directly to your employment or entitlement to Medicare. In other words, if the qualifying event is caused through a direct relationship with your employment, your employer has a duty to notify the plan administrators.
  • If the qualifying event relates to events outside of the workplace, such as divorce, legal separation or a child ceasing to be covered as a dependent, qualifying beneficiaries must notify the plan administrator within 60 days of the qualifying event.
  • Once the plan administrator(s) receive notice of a COBRA Qualifying Event, the plan administrator has 14 days to mail the COBRA Election Notice. You will have 60 days to decide whether to take up COBRA or not.
  • You now have 60 days to make up your mind, either from the date your notice was mailed, or the date your benefits, through your (former) employer, would end.

    How much will it cost?

  • Although beneficiaries will still be part of an employer’s health plan, the entire responsibility for payment rests on the beneficiaries. On top of this, the employer is entitled to add a maximum of 2% administration cost onto the plan. The maximum a beneficiary can be expected to pay would be 102% of the cost of the plan.
  • Beneficiaries must pay all co-payments and deductibles, as well as satisfy all the other payment rules attached to the plan.

    Here are a few points to consider while deciding on electing COBRA continuation of coverage

  • It is always advisable to know and research your options before you elect COBRA. It can be expensive, especially for a plan that you have little control over. Talking to a qualified broker, or researching your options online is a good place to start. Make sure you are empowered to make the right choice according to your needs and resources.
  • In some circumstances, when dealing with pre-existing conditions, for example, COBRA may be your best option. However it is always wise to check your other options first.
  • Electing COBRA in many cases has you paying the entire costs of the plan, while having little control over how the plan is structured or administered. Taking an honest look at your needs and considering the true costs of a policy, for example deductibles, exclusions and copay levels, is a good approach to take when considering alternatives. A good broker or adviser should be able to take you through your options.
  • For the period of time you are processing your COBRA, or making your decision you are not covered by Health Insurance. This has implications for scheduled treatments, emergencies and current treatments.

    Why consider COBRA alternatives?

  • COBRA can be expensive, but helps ensure you have continued coverage for pre-existing health conditions.
  • Individual health insurance can be more affordable and a better fit for your needs.

    You are a candidate for a COBRA alternative if:

  • You have no pre-existing conditions.
  • You want continual permanent coverage at a lower cost.
  • You have had no health problems.
  • You have not received any advice from medical professionals advising you to undergo a medical procedure in the future.
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