COBRA Health Insurance, Obamacare, or Both?

I just lost my job, along with my company health insurance. My boss says I can sign up for coverage under COBRA for a maximum of 18 months or take my chances with Obamacare. What should I do?

A: Do both. Sign up for COBRA coverage immediately and then switch to a less expensive Obamacare health plan beginning Jan. 1.

COBRA—the Consolidated Omnibus Budget Reconciliation Act of 1985—guarantees you the right to remain on your employer’s health plan for a while between jobs. That’s a good thing.

But you have to pay the entire premium, including the roughly 70 percent subsidy that your boss has been kicking in. That’s a bad thing.

This year, according to the Kaiser Family Foundation, employers paid $11,786 of an average worker-family’s $16,351 in annual premiums. Assuming those averages, your out-of-pocket premium costs under COBRA are about to more than triple from $380 a month to $1,362.

I’m hoping your numbers are better than that. But the fact remains, your premium costs will soar under COBRA. You’ll have to pay a lot for the rest of this year to protect your family against ruinous medical bills, like $88,000 for a bout of pneumonia.

Fortunately, the Affordable Care Act, aka Obamacare, figures to bail you out beginning in January.



In simple terms, the government is offering to step into an average employer’s shoes and kick in roughly the 70 percent subsidy for Obamacare insurance in the form of tax credits. Again, those are just averages. But since you are out of work, you may well qualify for subsidies worth more than $1,000 a month.

People earning up to 400 percent of the poverty level will qualify for the government subsidies on exchange health plans—that means, individuals earning up to $47,000 and families of four making up to $94,200.

The subsidies slide with income. The most generous payouts will go to those making up to 250 percent of poverty—individuals making up to $28,725 and families of four earning up to $58,875.

Go to HealthCare.gov or call 800-318-2596 to find out if you qualify for subsidies and how to contact your state’s exchange marketplace. The state exchanges, though off to a glitchy start, are enrolling people now, and will continue signing up members until March 31. If you sign up by my mid-December, your coverage will begin January 1. If you sign up later, you will be covered for the rest of 2014, but you may lose a month before benefits begin.

Assuming you enroll in an Obamacare plan, as soon as coverage starts you can kill your COBRA—and save a basketful of money.