Maybe....Maybe Not.

Recent legislation concerning COBRA has left many with unanswered questions.

The American Recovery and Reinvestment Act of 2009 offers people eligible for COBRA a 65% credit towards their premium.

Q: What is COBRA?

The Consolidated Omnibus Budget Reconciliation Act or COBRA allows workers who have lost their job to keep the group health insurance plan provided by their employer.

Q: 65% is a big savings, are there downsides?

A: The 65% COBRA subsidy only lasts 9 months. After which you will have to pay the full COBRA premium or find a private health insurance plan. If you get sick in the first 9 months you may not be eligible for a private health insurance plan, forcing you to pay the entire COBRA premium once the subsidy expires.

Q: How does the 65% credit work?

A: Nobody, including the government, seems to have all the details just yet. The subsidy comes as a tax credit to the employer. The unclear details is how, when, or what tax forms are needed by the employer to file for the credit. In addition, not many employers are happy about 'fronting' health insurance money to former employees while waiting to get it back from the government.

Q: What is the cost of COBRA versus a private individual policy?

A: The typical COBRA premium can range from $300 or more per month for single coverage, to well over $1,000 per month for a family. In contrast, private individual health insurance can cost less than half this amount, and be kept for as long as the premium is paid.

Q: How could an individual health insurance plan cost less than COBRA?

A: COBRA must take everyone regardless of health status and cover all pre-existing conditions, which causes the price to be very high. An individual or family health insurance plan is medically 'underwritten', which means that you must qualify in order to receive coverage.

Q: Why would I want a plan that I have to be medically underwritten (asked about my personal medical conditions)?


A: Think of it this way…if you went to a bank and asked them what you needed to qualify for a loan, and they said to you: "nothing…..all our customers qualify, pay the exact same interest rate, and no credit application or report is required". This may sound great at first, especially if you had bad credit. However, if you had good to fair credit, chances are you would receive a much lower rate if they ran a credit report or 'qualified' you for the loan. The same principle applies to health insurance…..better the risk…..better the rate.

Q: A lower premium on an individual health plan sounds great but what if I have a pre-existing condition?

A: This varies by state and the medical condition. Some states allow premium ratings (a rating is extra premium to cover the condition immediately). Some states allow exclusion riders (a rider excludes the condition for set period of time). Some states allow both. Our health insurance agents can help you.

Q: Can you give me an example of a pre-existing condition and how it may work when I apply for private insurance?

A: Let’s say your single COBRA premium is $325.00 per month and you have asthma. To save money you apply for an individual health insurance policy that costs $150 per month, but the insurance company wants to place an exclusion rider (not cover) on your asthma for 2 years. Now your asthma may be very well in control and it may not be. Let’s assume it is and you use a few inhalers a year and you have not been in the hospital or ER in a very long time due to your asthma. You may decide at this point it’s not worth an extra $175 per month or $2,100.00 a year to have your asthma covered from day one or go without insurance period because you can’t afford $325.00 per month. This however gives YOU another choice and you will have to make the best decision for your situation.