Big (but Temporary) Changes to COBRA

COBRA Healthcare Insurance Benefits for Unemployment concept on wooden board

Big (but Temporary) Changes to COBRA

 Marcie Nach, CFP®, Financial Planner

October 9, 2020

We know the Coronavirus has impacted everyone in ways that were unimaginable at the beginning of the year. This post is the 14th in a series designed to help you make the most of this challenging time. You can read prior posts in the Coronavirus Resources section of the SWP Blog.

Have you or a loved one lost your employer-sponsored health insurance as a result of COVID-19?  If so, you are not alone.  According to an August 26 report by CBS News, it is estimated that more than 12 million people have lost their health insurance during the coronavirus pandemic.

Evaluating your choices after losing employer-sponsored health insurance can be difficult.  As a reminder, COBRA, the Consolidated Omnibus Reconciliation Act, gives workers and their dependents the right to continue health benefits provided by their former employer’s plan for up to 18 months in most circumstances.

A recent change to COBRA rules may help people who have lost coverage.  As a result of the pandemic, the Department of Labor has extended the period of time a person may elect COBRA coverage from 60 days to effectively 120 days after the COVID pandemic is no longer considered a national emergency.  That is a significant change!  The national emergency was declared on March 1, and at this time, there is no end date in sight.

What does this mean?  If a person did not specifically “opt-out” of COBRA coverage at the time of separation, and they lost their employer health insurance on or after March 1, they can still elect COBRA anytime if they are currently without health insurance.  Until four months after the national emergency declaration is lifted, there is no deadline to retroactively get COBRA coverage.  The significant caveat is that they must pay all the COBRA premiums going back to their date of separation.  While that is likely an expensive proposition, this could be useful if someone has been without coverage and now is facing a serious or expensive illness.

If you have lost employer-based coverage, it is important to examine all of your choices, including switching to a spouse’s plan if possible, applying for coverage through the Affordable Care Act, purchasing a short-term health care plan, and even Medicaid (if applicable).  Also, while the COBRA deadline may have changed, you are still subject to a 60-day time frame if you want to sign-up for new coverage on your state’s health insurance marketplace after leaving your employer.  While navigating health insurance options is difficult at best, having more time to determine if COBRA is appropriate during the pandemic can serve as a safety net under certain circumstances.

There have been a head-spinning number of rule changes this year, so maybe that is the reason that this COBRA change has received very little coverage in the media, but we thought it was important to bring it to your attention.

We understand how important health care decisions are to your overall financial health and would be happy to discuss your particular situation if you have any questions.

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