Alternatives to COBRA Coverage
If you were recently laid off or left work with an employer who provided health insurance, then you probably received information on enrolling in COBRA. You probably thought to yourself: "Great! I can continue to receive my coverage. I just need to foot the $30-100/month monthly premium and I'm good as gold!"
The truth is: With COBRA, you pay the entire premium of your coverage. Though you'll receive the same benefits from your health plan and you can't be denied coverage based on pre-existing conditions, you may still find yourself strapped with health insurance bills that surpass $1,000 a month - much more than is possible with a modest monthly unemployment check of a little over $1,200 on average.
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Why is COBRA so expensive? The reason most new COBRA enrollees get hit with sticker shock is because employers usually pay for the majority of the group health insurance coverage through work. It's likely that you do make your own contribution, of course, but it's also likely that you only make a modest contribution. In fact, the Kaiser Family Foundation found that the average employee contributes only one of every four dollars spent on the actual coverage; the other three dollars is paid by the employer5. So which options do you have that would cost less than COBRA? Find out below.
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Which COBRA Alternatives are Available?
- High-deductible Health Insurance Plans: These health insurance plans cover catastrophic medical costs. Usually different levels of deductible amounts are available, from a few hundred dollars to $10,000 or more in a year. These health insurance plans are often combined with health savings accounts for tax advantages and improved coverage.
- Health Savings Accounts: Also known as HSAs, these plans allow you to save a tax-free amount of money each year to spend on your own health care costs. You generally do not pay much for a health savings account, but it's a valuable tool to help eliminate the high premiums associated with more comprehensive health plans.
- Health Maintenance Organizations: As a managed care organization, HMOs use the power of the health network to save you money. Though HMOs are generally more expensive than HSAs and high-deductible health plans, they are a good low-cost alternative to COBRA in some cases.
- Discount Programs: Discount programs help you save money on prescription drugs, vision, dental care, and other types of care that may not be included in a high-deductible health insurance plan. You can combine this type of program with other low-cost health plans to pay less than COBRA and still receive adequate care above and beyond simple medical care.
- Medicaid: If you were recently laid off, then you may qualify for your state's Medicaid program, depending on your current family income level. You will need to check with your state to see if you qualify.
If you're interested in lowering your monthly premium and spending less on coverage than the typical COBRA premium, then you should explore various private health insurance plans.
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5 "Employer Health Benefits: Summary of Findings." Kaiser Family Foundation. < http://ehbs.kff.org/images/abstract/7791.pdf >