Some of my most recent customers have been caught up in this question; Do I stick with Cobra or Individual insurance? It is not an easy answer, but if you have a medical condition, you may not have an option to move away from Cobra until it is exhausted. This would be if you have had a heart attack, cancer, diabetes or even if you are over the height and weight requirements to get insurance. If you have one of the un-insurable conditions, then you will need to complete your Cobra to be eligible for the Texas Risk Pool. Your agent will be able to help you determine based on your particular situation.
If you and your family are healthy with no major medical conditions, then you can choose. This week with President Obama signed an extending the federal subsidy for Cobra for an additional six months relieving the financial issues surrounding Cobra. I guess that seeing that Cobra is similar to a short term policy with a known period, I would suggest to my clients to move to an individual policy as soon as possible. There are very few situations in which I would recommend putting a client on a short term policy.
The risk with any of these policies is that they coverage does come to an end. This would mean in today’s health insurance industry, they would not be able to continue treatment on anything that the previous insurance company did not complete and the patient recover fully from. In the future this may not be an issue with the health care reform. This can be a very expensive mistake by the customer to keep Cobra, and find himself in this situation where there was no coverage available to complete his recovery. In Texas we are fortunate to have the Texas Risk Pool, but this is much more expensive than an individual policy.
I had a customer today withdraw his application for individual insurance coverage for his family to continue with Cobra benefits. I tried to make him aware of the exposure with staying with Cobra, but he told me so it is no different than being on a group policy. Well, it is a close comparison to this, with a group you have additional features from your employer that can allow you to stay employed and continue your health coverage with short and long term disability. On Cobra once it is done, you are done.
I still believe that moving away from Cobra as soon as you can is the best move to protect you for the long haul. This can be because you have become self employed or if you have not found another company to work for with group health insurance benefits. Something that is permanent as long as you pay the premiums offers you the best protection. The government incenting Cobra on the American people can leave some uninsured and un-insurable when Cobra is exhausted.
I have run into a customer recently that had a heart attack on Cobra. She was healthy individual with good build and never thought that they may have a heart condition. They ended up on Cobra needing two stents put in, and she had contacted me when her Cobra benefits were almost over – 18-months. I had to tell them that they will not be able to get individual insurance and the only major medical option available to them is the Texas Risk Pool. The customer said to me if they had known that they may be in a situation where they would be forced to the Texas Risk Pool, they would have got off Cobra as soon as they could. They felt that because the government was discounting the rates this was the way to go. There is as well a corporate knowledge that you always sign up for Cobra if you lose your job. For this customer the Texas Risk Pool was in the $500+ a month for a $7,500 deductible plan. The customer said they could not afford it and I now believe they are living without any coverage. It seems very wrong, but this is the way it is.
As a licensed insurance broker I would always recommend replacing Cobra a soon as you can if you are able. I am even starting to believe that group plans are not the best way to go if we leave our health care system be able to deny insurance to customers. Maybe this will change in the future, but today I would move away from Cobra as soon as you can.