How to Decide Between COBRA and Purchasing New Health Insurance
Changing jobs means changing health insurance.
One of the most important decisions when making a job change is selecting optimal health insurance coverage. Employees leaving a full-time position at a company that offered health insurance benefits have the option to elect COBRA and stay on their existing plans.
While working at the company, employees pays the net cost of health insurance through payroll deductions, with the final amount determined by the amount the employer pays on behalf of the employees. In many cases, employees pay a small percentage of the total cost.
With COBRA continuation, the beneficiary pays the total cost of coverage. To determine whether it is better to elect COBRA or purchase new coverage, consider the following factors:
- What is the monthly cost of COBRA coverage, including the monthly administration fee?
- This fee is 10% for Small Group plans and 2% for Large Group plans.
- Decide whether to continue Dental and Vision coverage (if they were offered)
- What is the level of coverage needed?
- Changing medical plans may impact treatment plans for ongoing health conditions.
- How long is the expected gap in employment?
- If the new job offers health insurance benefits, find out when the coverage will start.
- Get some quotes for replacement health insurance plans before leaving the current job.
- Enrollments must be submitted before the 15th of the month for coverage to start the following month.
- There may be some exceptions, and some carriers may accept applications later than the 15th.
- Compare the cost vs. the level of benefits needed.
- Saving money may be critical between jobs, so avoid purchasing more coverage than is required.
In summary, the decision regarding COBRA coverage depends on the following factors:
- Cost of COBRA
- Cost of alternative health insurance plans
- Timing of job change and potential length of the gap in coverage
- Health conditions of family members and any ongoing medical treatments
In any case, dropping coverage altogether should be avoided as this can create serious financial consequences and adverse health outcomes.