COBRA Vs Obamacare—Which Is Better?

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Weighing the alternatives of COBRA vs Obamacare when you're about to lose your health insurance. Image © BunnyHollywood/Vetta collection/Getty Images

About to lose your job-based health insurance? Considering COBRA, but not sure which is better, COBRA or Obamacare?  The answer depends on your situation, but here’s how COBRA and Obamacare compare.

Same Health Plan Vs Different Health Plan

When you choose COBRA, you’re paying to continue coverage under the exact same health insurance plan you already have.  You know how it works and what to expect.

The only learning curve involved is learning when and how to make your COBRA premium payments.

If you pick an Obamacare health plan from your state’s health insurance exchange, you’ll be giving up your old plan and will have several new plans from which to choose. In this case, you’ll need to study up to understand how your new health plan works if it’s a different type of plan than your old one. For example, if you used to have a PPO but your new Obamacare plan is an EPO, you’ll need to understand how they differ so you’ll be able to use your new plan effectively.

If you continue your current plan under COBRA, you know your doctor will be in-network because you're not changing your health plan. If you choose a new Obamacare plan instead, you’ll have to make sure that your doctor is in-network with your new plan, or you’ll have to change doctors. You’ll need to check that your specific prescription medications are covered under your new plan’s drug formulary, or you may have to pay for them out-of-pocket.

Pay the Full Premium Vs Maybe Get a Subsidy to Help You Pay

If you choose COBRA continuation coverage, you’ll pay the full monthly premium for that coverage yourself. There are no subsidies to help you pay COBRA premiums, and they're expensive. Learn just how expensive COBRA is in “How Much Does COBRA Health Insurance Cost?

If you forgo COBRA and buy your health insurance from your health insurance exchange instead, you may be eligible for a subsidy to help lower your monthly premiums. In addition, you may be eligible for a subsidy to lower your out-of-pocket maximum or to decrease your deductible, copayments, and coinsurance. These subsidies are only available for health insurance purchased through an Affordable Care Act health insurance exchange.

All of these subsidies are based on your income. The more you earn, the lower your subsidy will be. If you earn a lot, you may not be eligible for a subsidy. But if your income is moderate, you’re likely to qualify for help. Learn more in “Can I Get Help Paying for Health Insurance?

Second Chance Vs No Second Chance

If you’re eligible for COBRA, you only have a limited time to enroll. The clock starts ticking the day of the triggering event that made you eligible for COBRA, for example, the day you got divorced or were laid off.  If you don’t act before the deadline, you’ll lose your chance.You don't get a second chance.

If you lose your job-based health insurance, you’ll probably qualify for a special enrollment period on your state’s health insurance exchange. Like the COBRA election period, this special enrollment period is time-limited. However, if you miss the deadline, you’ll have a second chance to sign up for health insurance on the exchange during the annual open enrollment period every autumn. There is no open enrollment period for COBRA.

Duration of Coverage

COBRA doesn’t last forever. It was designed as a program to get you through until you secure other coverage. Depending on what type of triggering event made you eligible for COBRA, your COBRA coverage will last from 18-36 months. After that, you’ll have to find other health insurance.

You may sign up for an Obamacare plan for a calendar year. If you’re signing up during a special enrollment period, you may switch to a new plan during next autumn’s open enrollment period. If you want to continue your new Obamacare plan for more than a year and your insurer offers it next year, you can renew it through your exchange. If your insurer doesn’t offer your Obamacare plan next year, you’ll be able to sign up for a different plan on your exchange.

Premium Payment Grace Period

COBRA doesn’t allow second chances. If you're late on your initial premium payment, you'll lose your right to COBRA coverage and you won't be able to get it back. If you’re late on a monthly premium payment other than your first payment, your health insurance coverage will be canceled that day. If you make your payment within the 30-day grace period, your COBRA coverage can be reinstated. However, if you don't make a payment within the grace period, you won’t be able to get your COBRA health insurance back.

If this happens to you, you'll really be in a bind. Losing your COBRA coverage by failing to pay your premiums doesn’t make you eligible for a special enrollment period on your state’s health insurance exchange. You’ll have to wait until autumn open enrollment to enroll in an Obamacare plan; you’ll risk being uninsured in the meanwhile.

While the insurers that sell health insurance on your state’s health insurance exchange expect to be paid on time every month, the grace period for late payments is longer than COBRA's for some people. The Affordable Care Act allows a 30-day grace period for late payments to all health plans sold on exchanges. This is extended to 90 days if you're receiving a health insurance subsidy.

Governing Body

COBRA plans and job-based health insurance are regulated by the Department of Labor. If you have a significant problem with your COBRA plan, after following the plan’s appeals and complaints process, you may end up dealing with the Department of Labor in an attempt to resolve the issue.

Health plans sold on your state’s health insurance exchange are regulated by each state. If you have a significant problem with your exchange-based health plan, after following the plan’s appeals and complaints process, you may end up dealing with your state’s Department of Insurance or Department of Insurance or Insurance Commissioner to resolve the issue.

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