Alternatives to COBRA Health Insurance

There are many alternatives to COBRA health insurance. Pick the one that's best for you. Image © Phil Ashley/Getty Images

If you’re considering paying for COBRA continuation of your health insurance, check out the alternatives to COBRA before you sign on the dotted line. In the past, there weren’t many alternatives to COBRA, but now you have several options. You may be able to find a less expensive alternative to COBRA that will meet your needs while saving you money.

Be careful, as some of these alternatives must be timed carefully.

Just as there is a window of opportunity for you to sign up for COBRA, there’s also a window of opportunity during for you to sign up for some of the alternatives to COBRA. Signing up for COBRA closes the window of opportunity for some COBRA alternatives, so look at your choices carefully before you sign up for COBRA or a COBRA alternative.

Am I Even Eligible For COBRA Health Insurance?

How Much Does COBRA Health Insurance Cost?

Alternatives to COBRA Health Insurance

Obamacare. Obamacare is just a nick name for private health insurance sold on your state’s Affordable Care Act health insurance exchange. You can buy health insurance from name-brand private health insurance companies on the exchange.

Even if it’s not open enrollment on the health insurance exchange, if you lose your employer-sponsored health insurance, you’re probably eligible for a special enrollment period that will allow you to sign up for an Obamacare plan.

However, if you’ve already signed up for COBRA, your window of opportunity to enroll in an Obamacare plan has closed for now. You won’t be able to switch from your COBRA health insurance to an Obamacare plan until the next open enrollment period.

When Is Open Enrollment on Health Insurance Exchanges?

If you have a modest income, you may be eligible for help paying for health insurance if you buy a health insurance plan on your state’s health insurance exchange. Health insurance subsidies are only available to those who make from 100-400% of federal poverty level and get their insurance through the health insurance exchange.

Catastrophic Health Insurance. You may be eligible to buy catastrophic health insurance if you’re under 30 years old or eligible for a hardship exemption from the mandate to have health insurance.

Do You qualify for Catastrophic Health Insurance?

Catastrophic health insurance may have lower monthly premiums than a more standard health insurance plan, but it comes with an extremely high deductible. Thanks to the Affordable Care Act, once you’ve met the deductible, catastrophic health insurance will now cover all of the essential health benefits.

If you have enough in savings to pay the deductible, have a Health Savings Account you can tap into to cover the deductible, or are very healthy and likely won’t need to use your health insurance, a catastrophic plan may be a money saving option for you.

You can buy one on you state’s health insurance exchange.

Short-Term Health Insurance. A short-term health insurance plan can be a cost-effective alternative to COBRA if you’re sure you’ll be able to get other coverage when the policy term ends. Short-term health insurance is usually cheaper than other types of health insurance, but it lacks some of the consumer protections the Affordable Care Act requires major medical plans to have. Learn more in:

What's So Good About Short-Term Health Insurance?

What to Beware of With Short-Term Health Insurance

You can’t buy short-term health insurance on your state’s health insurance exchange since it doesn’t offer all of the essential health benefits required of full health insurance coverage plans. However, you can usually buy short-term health insurance directly from major health insurance companies. Additionally, a health insurance broker can help you purchase a short-term health plan, or you can buy one through a private exchange such as

Spousal Coverage. If your spouse has health insurance coverage through his or her job, you may be eligible to gain coverage under that plan. In most instances, losing your employer-based health insurance coverage will qualify you for a special enrollment period with your spouse’s group health insurance plan. There is a time-window for this option, so have your spouse check with his or her employee benefits department immediately.

Young Adult Coverage Under a Parent’s Plan. If you’re under 26 years old and your parent has a health plan that includes family coverage, you may be eligible for coverage under your parent’s plan. Once again, losing your current health insurance coverage will likely qualify you for a special enrollment period under your parent’s plan, but this opportunity is time-limited. If you don’t decide before the special enrollment window closes, you’ll have to wait until the next open enrollment period.

Choose To Be Uninsured. While I wouldn’t recommend that anyone go without health insurance, I realize that you may be considering this as an alternative to COBRA coverage. These resources may help arm you with the knowledge necessary to make a fully-informed decision:

Uninsured? What You Need to Know About Obamacare

Prepare to Be Uninsured—a Tool Kit for Going Without Health Insurance

Uninsured? Understand Your Risks

Choosing COBRA

You may find COBRA an attractive choice despite the alternatives if you like the health plan you have or you want to keep your current provider network. Additionally, if you have an HSA, you can use HSA funds to pay your COBRA health insurance premiums. You can’t use HSA funds to pay most other health insurance premiums unless you’re collecting unemployment insurance benefits. Learn more in “What You Can Spend Your HSA Money On.” You can’t use money left in an FSA to pay COBRA premiums.

You have a limited time to sign up for COBRA; if you miss the deadline, you don‘t get a second chance. Likewise, if you’re late on even a single monthly premium payment, your health plan can drop you. COBRA is only good for 18-36 months. After that, you’ll need to find another alternative to COBRA or you’ll wind up uninsured.

Continue Reading