5 Health Insurance Alternatives to COBRA

5 Health Insurance Alternatives to COBRA

The saying ‘when life comes at you, it comes fast’ couldn’t be more accurate when bad luck or misfortune happens. You could lose your job and, with it, your health insurance. A report released by the United States Census Bureau in September 2021 revealed that a 0.6% drop in employer-sponsored insurance between March 2019 and March 2021 led to a decline in the number of Americans with health insurance by 0.8%.

In theory, COBRA (Consolidated Omnibus Budget Reconciliation Act) is a great soft-landing insurance option. It was enacted to help people who lost their jobs retain the benefits of their employer’s insurance. However, COBRA is quite costly insurance with premiums, in many cases, coming close to a thousand dollars. This is a big problem for you if you just lost your source of income, not to mention that COBRA is only temporary medical insurance.

Whether you just lost your job and health insurance, or fear losing it soon, here are five health insurance alternatives you may consider.

1. Short-Term Health Insurance

When you lose your job and employer-sponsored health insurance, you typically have up to 60 days to decide whether to sign up for COBRA. Notably, COBRA coverage does not begin immediately when you submit the paperwork as there is another three to four week processing time that you have to wait. The process is lengthy, but you would still be responsible for paying the full initial premium regardless of the waiting period.

Faster processing times

Many people will find it more accessible, safer, and cost-effective to find short-term health insurance to plug the coverage gap in between jobs. In addition, short-term coverage is processed faster – often taking effect as soon as the following day.

They are flexible and offer more features

COBRA is very limited. You cannot reinstate once discontinued, and you cannot make changes to your plan to suit your specific needs. On the other hand, short-term health insurance options offer superior features and competitive flexibility. They allow you to shape your plan to meet your immediate needs, including:

  • Choosing your own doctors or health institutions.
  • Up to 90 days of full coverage
  • Co-pays and personalizable deductibles

Greater Value with Affordable Premiums

The primary reason many people seek alternatives to COBRA is that it is costly. After all, when the employer no longer subsidizes the premium, you have to shoulder the full cost out-of-pocket. However, short-term medical insurance is much more affordable than COBRA. You can customize coverage to suit your immediate needs and budget and pay what you can afford.

Short-term health insurance options may not cover various vital health issues such as pre-existing conditions, mental health care, or maternity care.

2. Affordable Care Act (Obamacare)

Affordable Care Act (ACA) plans are the top health insurance options for you if you cannot afford or would rather not pay for COBRA. With the ACA, you can get a good health care plan on the health insurance marketplace in your state. ACA is a state-run health plan shopping and enrollment system offered by the United States government.

On top of the reasons to consider ACA is that it is the government’s proactive attempt to lower health insurance costs for Americans in need. Note, however, that you will need to have an income between 100% and 400% of the federal poverty line in your state to qualify for a tax credit towards the health insurance premiums.

Here are the top benefits of choosing ACA:

  • You cannot be denied health insurance coverage for pre-existing conditions.
  • Depending on your income, you may be eligible for a care plan premium subsidy. If you lost your insurance because you lost your job, you might be a good candidate for this benefit.
  • In the wake of the Coronavirus pandemic, the government’s American Rescue Plan aims to include more people in the plan in 2021 and 2022.
  • If you have a qualifying event, you can get help with your health insurance premiums during the ACA special open enrollment window. Losing your job and employer-sponsored insurance coverage is a qualifying event sufficient to trigger a special enrollment period.

3. Independent Health Insurance

So, you just lost your job and health insurance. Do you find COBRA premiums are too costly to sustain, you have reasons not to go for short-term health insurance or need broader coverage, and you do not qualify for ACA plans? If so, your next best option is independent health insurance.

You can purchase an independent health care plan from a private insurer outside the ACA Marketplace. Unfortunately, since they are not Marketplace plans, you cannot get help with premiums or subsidies. However, it may be a good alternative for you as some coverage plans are more affordable than COBRA but still offer more or comparable value.

Independent insurance plans outside the ACA marketplace are structured to meet the ACA requirements. The plans cover preventative care and pre-existing conditions without imposing costly caps or limiting other essential plan features. The coverage premium rates may vary – even rise year-to-year – but they offer the option to choose plans that meet your needs, with copayments and deductibles to suit your budget.

Since independent health insurance plans are not listed on the ACA marketplace, consider talking to an MyHST agent to find a coverage plan that suits you. You can also search and compare the plans online to find an ideal coverage for your needs and situation.

4. High Deductible Health Plan (HDHP)

According to HealthCare.gov, a high deductible health plan is a health insurance plan with a higher deductible compared to the traditional insurance plan. Simply put, this is a plan with lower premiums but will require you to pay care costs out-of-pocket before the insurance company can step in with your deductible.

You can combine a high deductible health plan with different coverage or a Health Savings Account (HSA) to enable you to pay for healthcare costs free from federal taxes.

Whether you choose a short-term health insurance coverage, Obamacare, or an independent health plan, choosing a high-deductible plan will go a long way to lower your monthly premium costs.

A high deductible health plan is a practical health insurance choice if you wish to replace COBRA but do not expect to use your health plan soon or just want to have it just in case. The most notable benefit of this plan is that it covers you from high-cost medical expenses until you reach your deductible ceiling.

A high-deductible health insurance plan is ideal if you have good health, have no dependents, or have some money saved for a rainy day. It is also a good option if money is tight after losing your job and you would wish to focus on saving. MyHST recommends that you set up a health savings account to complement the high-deductible plan and make tax savings on your medical expenses.

Note that the IRS defines the limits of HDHP health insurance plans. For 2022 the minimum deductible is $1,400 for an individual or $2,800 for a family. The maximum annual out-of-pocket medical expenses for this plan is $7,050 for individual plans and $14,100 for family plans. These expenses include coinsurance, deductibles, and copayments but exclude out-of-network services.

5. Long-Term Health Insurance

Do you have reason to believe that your loss of employment will not be a temporary setback on your health insurance coverage? Perhaps you do not expect to get a proper insurance coverage plan in a new job or no longer expect to find employment that comes with insurance coverage? If any of these scenarios sound true to you, it may be time to consider a long-term health insurance plan.

The Marketplace may offer long-term health insurance through special enrollment periods for people who qualify for COBRA.

If you cannot get COBRA coverage because you cannot afford it or do not wish to, you may qualify for long-term special enrollment insurance on or off the Marketplace.

These insurance plans will typically cost significantly less than COBRA plans. However, there can be plan challenges should you get offered different health insurance at a new job. This option is structured for individuals who qualify for COBRA but have reason to believe that their loss of employer-sponsored insurance is not temporary.

One notable benefit of special enrollment long-term insurance is that they offer the option to enroll your spouse if you are married. While it will cost less to sign up for an individual health insurance coverage, the benefits will be significantly limited should you include your spouse in the plan.

Despite the name, this coverage can be either short or long-term. Each plan defines the scope of its coverage, which determines the signup and premium costs.

Final Thoughts

The cost factor is the greatest determinant of the best health insurance alternative to COBRA. If money is tight and you wish to avoid the high costs of COBRA while seeking new employment that comes with health insurance coverage, short-term insurance or Obamacare may be good alternatives. However, if none of these are ideal for you, then you may have to turn to the Marketplace or find an independent insurance cover.

Whatever your situation, it is best to talk to an insurance agent. Talk to an MyHST agent today and get informed advice on what coverage is the better alternative to COBRA based on your circumstances..

MyHST is a wholly-owned subsidiary of the Allstate Insurance Company and the National General Insurance Group.