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COBRA Loopholes and Traps

Did you know that you have 60 days to accept COBRA coverage after receiving your COBRA Qualifying event letter from your (former) employer? Once you have a look at that premium that ought to inspire you to contact a quality local health insurance broker to see if there might be better options available in the individual health insurance market.

Sixty days to elect COBRA coverage may seem like a long time, but looking at alternative coverage is something you want to investigate right away. Otherwise, if there is a major claim or an adverse change in health for a family member you may be forced to keep (and pay for) the COBRA health insurance coverage.

If you do elect COBRA coverage within the 60 day COBRA election period, you then have 45 days from that point to pay the back premiuim, which may be a fairly sizable chunk of money. So, if you maxed out the 60 day election period plus the 45 day payment period, you could actually go 105 days without paying for the coverage. HOWEVER, before you decide to roll those dice, if a family member has an unexpected illness or injury don’t forget that you’ll have to pay ALL the back premiums for COBRA if you want your insurance to pay for it.

Depending on the severity of the claim you then may be effectively locked into COBRA for a longer period of time, as that unforeseen illness or injury may negate your or a family member’s ability to medically qualify for a lower cost individual health insurance plan. This is because individual and family health insurance plans are medically underwritten, which is one of the reasons they are typically much less expensive than COBRA health insurance coverage.

A more prudent and conservative approach would be to apply for a lower cost individual or family health insurance plan right away, but at the end of the day the choice is yours to make.

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