Which health insurance is right for me — COBRA or ACA?

If you’re between jobs and need health insurance, you have a couple options: COBRA or ACA. Answering these questions can help you make the best choice for your needs.

Leaving, losing, or changing jobs often goes hand in hand with losing your healthcare coverage. What doesn’t go away is the need for access to good quality healthcare. The tricky part is figuring out where to get it if it’s not from an employer.

“One of the most popular questions I get from my clients is, ‘Should I get my healthcare through COBRA or the ACA?’” says insurance advocate Adria Gross, CEO and founder of MedWise Insurance Advocacy in Monroe, New York. If you’re under age 65 — and thus not eligible for Medicare — and you aren’t covered by someone in your family, these are your two choices for health insurance coverage. COBRA stands for Consolidated Omnibus Budget Reconciliation Act. The ACA (Affordable Care Act) established insurance plans that are available through the federal marketplace.

If you feel like you just swallowed a big spoonful of alphabet soup, help is here. We have a simple overview of both COBRA and ACA, along with questions you can ask yourself to help you find the right fit.

What’s the difference between COBRA and ACA?

COBRA is a federal law that gives you (and your family) the right to continue with group health benefits even after your job ends. Companies with at least 20 employees that offer health insurance are legally required to offer COBRA. Some states also have their own mini-COBRA laws for companies that have fewer than 20 employees.

When you choose COBRA, some things will stay the same. For instance:

  • You will keep the same health insurance plan you had through your employer.
  • You can continue to see your current providers.
  • Your prescription medications should still be covered under your existing plan’s formulary. (A formulary is the list of covered drugs.)

The one major difference: You will now pay for the plan’s full monthly premiums. A big chunk of that used to be paid by your employer. There can also be an additional 2% administrative fee. So your monthly cost for healthcare will go up.

How much it goes up depends on how much your employer was contributing. According to a Kaiser Family Foundation survey, employers pay an average of 82% of the cost of an individual worker’s health insurance. And they pay 69% for family coverage.

Turning to the ACA, this healthcare reform law was passed in 2010. It extends health insurance coverage to millions of uninsured Americans. It’s also known as Obamacare.

This law established the Health Insurance Marketplace, a service run by individual states. The marketplace offers a variety of insurance plans to people who don’t qualify for group employer coverage. These plans are legally required to cover preexisting conditions. They also must cover many essential health services, such as blood pressure screenings and mammograms.

Under the ACA, you pick a health plan from the federal government website HealthCare.gov or your state’s health insurance exchange. As a result, the coverage you had with your former job will definitely change. Depending on the plan you select, you may not be able to keep seeing your current doctors.

You can choose either COBRA or ACA plans at any time of the year. That’s different from the fixed open enrollment period you may have had with your former employer. Both allow you to enroll within 60 days of losing your health insurance coverage.

5 Questions That Can Help You Choose.

Choosing a health plan is an important decision, so take some time to think about your options. Asking yourself the following questions — and answering them honestly — can help point you in the right direction.

1. What can I afford?

That will depend on your COBRA offer from your employer, says Noor Ali, M.D. Dr. Ali is a concierge health insurance adviser in Tampa, Florida. “If they continue to [help pay for] the cost, then COBRA is the better option,” Dr. Ali says.

Unfortunately, most employers don’t continue to chip in for your coverage. In that case, an ACA option may be cheaper, Dr. Ali says. ACA plans have sliding-scale subsidies that can lower your premiums and out-of-pocket costs, depending on your income. These savings come in the form of tax credits or discounts on deductibles and copays.

2. Have I already met my annual deductible?

Quick refresher: A deductible is the amount you pay for covered healthcare services before your insurance plan starts to pay its share. If you’ve met your deductible, you probably will have fewer out-of-pocket costs if you go with COBRA. “If you’ve met your deductible in any plan, it’s worth it to stick to it for the rest of the policy or calendar year to take advantage of those benefits,” says Dr. Ali.

3. Am I managing a chronic condition?

In good news, both COBRA and ACA will cover preexisting conditions, says Ali. But if you decide to go the ACA route, make sure your current doctors are covered under your new insurance plan. If they aren’t, and you want to keep seeing the same medical team, you may be better off choosing COBRA.

4. How long will I need this coverage?

If you don’t plan to get another job that offers health insurance somewhat soon, your answer to this question matters a lot. COBRA coverage continues for only 18 to 36 months. ACA plans, on the other hand, let you keep your coverage for as long as you pay your monthly premium until you reach Medicare age.

5. How old are you? 

Most employer plans don’t raise the cost of health insurance based on age. The same would be true of the COBRA plan. But under an ACA plan, premiums can be as much as 3 times higher for older people than for younger ones.

Finally, before you sign up for either COBRA or an ACA plan, be sure to request a copy of the insurance policy or policies you’re considering. Then give them a read to see what’s covered — and what’s not. That way, you’ll have a sense of which plan best fits your needs, says Gross.

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