By Elizabeth Davis, RN. Health Insurance Expert
Updated April 19, 2015.
Considering using COBRA for your health insurance? The best thing about COBRA is that you’re continuing your current health plan. You won’t have to learn how a new plan works or make sure your doctor is in-network with a new plan.
You May Not Be Allowed to Get COBRA
Some employers don’t have to offer COBRA continuation coverage even if you would otherwise be eligible for it. Learn more in “Am I Eligible For COBRA Health Insurance? “
If you’re used to having your employer pay part of your monthly health insurance premiums. you may find COBRA health insurance more expensive than you expected. When you pay your monthly COBRA premiums, you’ll be paying the portion your employer had been paying as well as the portion that had been taken from your paychecks as your share of your health plan premiums.
In addition, you’ll pay a 2% service charge. Learn more in “How Much Does COBRA Health Insurance Cost? “
If this isn’t enough to give you sticker shock, you’ll take a tax-hit, too. When your health plan premiums come out of your paycheck, they come out before income taxes are calculated. They make your income look smaller so your income taxes are lower. However, when you pay COBRA premiums, you use money you’ve already paid income taxes on rather than pre-tax money. You lose the tax benefit.
Under some circumstances, you may be able to use your premiums as a tax deduction. but this isn’t usually as beneficial as having premiums taken out of your paycheck on a pre-tax basis.
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You’ll Miss Out on Health Insurance Subsidies
If you choose to continue your current coverage using COBRA, you won’t be eligible for any of the Affordable Care Act’s health insurance subsidies. The subsidies are only applicable to health insurance offered on Affordable Care Act health insurance exchanges .
no guarantee you’ll be eligible for health insurance subsidies if you get your health insurance from your state’s health insurance exchange. However, if you are, a subsidy can help pay part of your monthly premium. lower your out-of-pocket maximum. and even lower your deductible, copays, and coinsurance. Even if you weren’t eligible for a subsidy in the past, you may be eligible now. Subsidies are based on your income, so if you’re considering COBRA due to a job loss or a divorce, there’s a decent chance your income will be lower this year than it was last year.
COBRA Doesn’t Last Forever
If you choose COBRA continuation coverage you’ll only have this coverage for a limited time. Under most circumstances, COBRA coverage is good for 18 months. In less common situations, you can use COBRA health insurance for up to 36 months. Either way, if you choose COBRA, you’ll have to make another choice in the not-so-distant future.
COBRA Can End Suddenly
Considering COBRA continuation coverage because you’re getting laid off? Are you being laid off because your employer is having financial problems? Watch out. If your former employer goes out of business, there may not be any health plan left. You can’t use COBRA continuation coverage with a health plan that doesn’t exist.
There Are No Second Chances With COBRA
COBRA health insurance is unforgiving when it comes to deadlines. You’ll have a limited period of time to make the decision to participate in COBRA. If you miss the deadline, you won’t be allowed to get COBRA even if you have no other health insurance options. If you decide to get health insurance somewhere else, but change your mind later, COBRA won’t be an option for you.
Once you’ve chosen COBRA health insurance, you’ll have to make monthly premium payments. If you miss a payment, your coverage will be terminated and you won’t be able to get it back. Even being late can result in permanent termination of your COBRA coverage.