Late this past summer, my partner and I faced a dilemma. Our grad school health insurance was set to run out in mid-August, and the insurance she’d get with her new job wouldn’t start until the end of September. We’d put it out of our minds for most of the summer, content to focus on the considerable effort of moving from Ohio to Maine.
But as August rolled around, and the number of days left on our old plan dwindled down to the single digits, we got anxious. We also got worried calls from our mothers, who, in the tradition of mothers everywhere, were certain that a terrible and gruesome fate would befall us the second we no longer had coverage.
In the end, it all worked out well. But bridging a gap in your insurance coverage, due to either a change of jobs or a change of circumstances, can be stressful and time-consuming. There are several options available, and it’s important to know the benefits and risks of each of them.
What is COBRA?
Despite its appearance, COBRA isn’t, in fact, a really emphatic snake.
Rather, COBRA is an acronym that stands for the Consolidated Omnibus Budget Reconciliation Act, a bill passed in 1985 that, as its name suggests, concerned a lot of stuff: railroads, the postal service, and pension plans, among other things.
But COBRA is primarily remembered today for its provisions about employers and health insurance: namely, that employers of a certain size (20+ employees) must provide “a temporary continuation of group health care coverage that might otherwise have been terminated” for their employees and their dependents. This continuation can last up to 18 months or, in some cases, even 36 months.
How do you qualify for COBRA?
Like other health insurance options, you must have a qualifying event to enroll in . However, you don’t have the wait for the . Should you experience a “qualifying event,” you could opt to continue the group health plan that you had previously enjoyed (via your employer, your spouse, or your parents) and that the qualifying event has unfortunately terminated.
Examples of COBRA qualifying events:
- You get laid off. Under COBRA, you can opt to stay on your former employer’s healthcare plan.
- You get divorced, and your insurance was through your now ex-spouse’s employer. You can opt to stay on it until you can secure your own coverage.
- Your spouse dies, and you had been on their plan. Again, you can hold onto your old coverage until a new insurance plan can be found.
- You’re the dependent of someone who’s just become eligible for Medicare. (Say you’re 25 and your parents have just turned 65. You were a surprise baby.)
COBRA’s main drawback
COBRA is a good option to have, but it has its drawbacks, namely the considerable expense.
This is because once you get laid off, or divorced, or your spouse dies, then the employer who had been providing the coverage stops subsidizing your premiums, and you are suddenly responsible for the whole amount. This can be several hundred dollars a month.
COBRA’s main advantage
The advantage, of course, is that you maintain the same level of coverage that you already have and don’t have to worry about a new plan not covering a much-needed treatment or drug.
This can be especially important for people who have chronic conditions or a dependent with special needs.
Remember, not all healthcare plans are eligible for COBRA
COBRA was our first thought when we finally sat down and considered our options. We never questioned whether we’d be eligible for it. After all, we had been graduate instructors at the large, public university where we’d both received our master’s degrees. They’d paid us for our work, and we’d been eligible (though not required) to take part in the state’s retirement plan for public employees. In theory, we thought, we should be able to get COBRA for our old plan.
We hadn’t received any paperwork, however. Calls to Human Resources weren’t helpful, as they redirected us to the insurance company. The people at the insurance company suggested we talk to Human Resources. In the end, we found out via another university’s website that we probably weren’t eligible.
Our insurance plan wasn’t the regular staff and faculty plan, but one meant especially for students, and thus it wasn’t subject to those same requirements. The murky employee status of graduate students probably contributes to the confusion. According to the IRS, they’re employees. According to the universities themselves, as well as the National Labor Relations Board, they aren’t. But, regardless, COBRA wasn’t an option.
We were frustrated, but a quick Google search revealed a much cheaper alternative: short-term health insurance.
What is short-term insurance?
Short-term insurance, also known as “gap insurance” or is really only good for, well, filling in the gap between the end of one type of coverage and the beginning of another. It’s available in monthly increments, usually up to 11 or 12 months, though some are only available for a shorter period, like 3-6 months.
Unlike ACA-approved plans available through the exchanges, short-term insurance plans are often pretty cheap and easy to get.
How do you qualify for short-term insurance?
My partner filled out the necessary info and paid her premium in less than 30 minutes.
For a healthy person in her late 20s, it cost about $120 for six weeks of coverage. (For comparison, the monthly premium for a silver plan in our state comes in at more than twice that.) The coverage was also effective immediately, unlike my ACA plan, which wouldn’t start until the beginning of the following month.
Short-term insurance’s main drawback is its main advantage
Let’s be realistic: the reason these plans are cheap and easy to get is that they’re not very good. They don’t cover much (like, say, prescription drugs or pregnancy), they have high deductibles, they will turn you down if you have pre-existing conditions, and, if you make a claim, they might try to weasel out of it by claiming your ailment originated before you bought coverage—or cover it but then refuse to ever insure you again.
Basically, short-term insurance plans engage in all the less-than-savory practices that the Affordable Care Act was meant to do away with. For this reason, these plans don’t count as “minimum essential” plans and thus won’t help you avoid the tax penalty for not having health insurance coverage.
When you should consider short-term health insurance
So, why would someone want to buy a short-term insurance plan? For the very reason that my partner did: to cover the gap between the end of a former employer’s insurance and the beginning of the new employer’s. (I, on the other hand, was just exceptionally cautious for the two weeks between when my grad school insurance elapsed and my ACA plan began.)
Short-term coverage has become more popular over the past few years, with some people who missed out on the ACA.
Short-term health insurance vs. COBRA
Short-term coverage is best for people who meet the following criteria:
- Are young and healthy.
- Need to make up a relatively small coverage gap between private or employer-sponsored plans.
- Are looking to guard against catastrophic health crises: car accidents, cancer scares, or random acts of violence.
COBRA is better for people who:
- Have very specific coverage needs.
- Are less concerned with the expense.
- Are more concerned with uninterrupted access to required medical care as they sort out other options.
How to best handle gaps in health insurance is different for everyone, but COBRA and short-term health insurance are two of the best options for doing so.
Although neither is perfect, both options can help you keep yourself healthy, even if just for a little while.
Featured image: Shutterstock.com/ Monkey Business Images