“COBRA” FACTS & DECISION INFORMATION
QUESTION: What is “COBRA” insurance?

ANSWER: “COBRA” is an acronym which refers to the “Consolidated Omnibus Budget Reconciliation Act” which was enacted in 1985. This law requires employers with more than 20 employees to allow those employees that leave the company to continue their insurance in the company plan for 18 to 36 months. The employee, in turn, is required to reimburse the employer for the cost of the insurance plus up to a 2 percent administrative fee. In effect, “COBRA Insurance” is essentially the same health plan an individual had through their group (typically an employer), but with the full cost paid by the individual. NOTE: Once the 18 to 36 month COBRA benefit period ends, the employee will be required to find other insurance.
QUESTION: Should I participate in the COBRA insurance plan?

ANSWER: The decision to use the COBRA coverage you are offered should (generally) come down to the question of whether or not COBRA represents the best health insurance value to you. So the answer depends largely on your individual circumstances. Although under COBRA you will pay the same group rate as your employer, what typically makes employer/group insurance benefits attractive to most individuals is not the cost of the insurance itself, but that fact that the employer subsidizes that cost through an employee benefit package. (This employer contribution is often an under-appreciated and misunderstood part of a person’s total employment compensation package.) In fact, individual insurance products are often much less expensive than COBRA insurance because individual plans can reward people for good health and healthy lifestyles, while group/COBRA plans cannot. Consequently, without an employer subsidizing their premium, many consumers find that an individual policy provides them with a better value.

Key COBRA Participation Questions: As with almost all health insurance decisions, deciding what is the best health insurance value for you comes down to the answers to a few basic questions:

How healthy are you (and/or your family)?
How much coverage do you want or need?
What level of financial risk do you feel comfortable with?
What percentage of your fixed monthly budget can you afford to devote to health insurance?
QUESTION: When DOES it make sense to participate in the COBRA insurance plan?

ANSWER: IN GENERAL, it probably makes sense to use your COBRA benefits if:

You have very comprehensive benefits and don’t mind the extra cost;
You have had recent, chronic or continual health problems;
You are required to take expensive medications; Or
You have been declined for insurance recently.
QUESTION: When DOESN’T it make sense to participate in the COBRA insurance plan?

ANSWER: IN GENERAL, it probably makes sense to find a COBRA alternative (i.e. to enroll in an individual health plan) if:

You want to maintain coverage but at a lower cost;
You have not had any significant/chronic health problems;
You have not received any recommendations from physicians or healthcare workers to undergo a medical procedure in the future; Or (especially)
You are not a “heavy user” of health care (i.e. generally healthy -- infrequent doctor visits, few if any prescription drugs, etc.) and are willing to self-insure a greater portion of your risk (through deductibles and co-payments) in exchange for lower monthly premiums or more robust benefits (such as Dental, Disability, etc.)