Is Enrolling on COBRA a Good Decision?

A person may be better off applying for an individual health insurance policy while he or she is healthy, rather than enrolling in COBRA in order to preserve the “insurability” of the person.

We frequently compare the cost and benefits of individual California health insurance plans with the cost and benefits of plans offered to them under COBRA for many people. It is easy to compare the monthly premium (which plan costs less?) and the benefits (annual deductible, PPO – HMO, doctor’s office visit cost, the cost of prescription medicine, out of pocket maximum.)

While one plan may be better in terms of lower cost and higher benefits, an additional component to the decision making that people should keep in mind is that the consequence of getting seriously ill while on a COBRA policy may make a person “uninsurable.”

Generally, if one is terminated from a job, the COBRA eligibility period is 18 months. California allows an additional 18 months under Cal-COBRA, however, the premium increases during the second 18 month period from 102 percent of the group employer’s premium to 110 percent of the premium.

So, let’s assume that a person in California can stay on COBRA for 36 months. This seems like a long time. Is it wise to stay on the COBRA plan – especially if the premium is lower and the benefits are higher than on a comparable California individual health insurance plan?

Consider the following:

  • A person can keep an individual health insurance policy indefinitely – regardless of changing health conditions;
  • California insurance companies medically evaluate all applicants for individual policies and can and do decline people who have pre-existing adverse health conditions;
  • A former employer on COBRA may change the plan benefits and premium at the group renewal date;
  • A former employer may cancel the group plan, in which case all COBRA enrollees would loose coverage and be forced to enroll in a HIPAA continuation policy;
  • Under the best case a person can stay on COBRA 36 months, then must go on a HIPPA conversion plan if unable to qualify for an individual health plan – these plans are very expensive compared to the standard premiums of individual health insurance plans -despite having identical benefits to standard plans.

In conclusion, make sure that you consider your long term “insurability” before enrolling in COBRA or Cal-COBRA. It may be wise to enroll in an individual health insurance plan while you are healthy and you can qualify for it.