It used to be that losing your job also meant either losing health insurance or paying a much steeper cost for the same health plan by signing on for COBRA. Buying a new insurance plan on the private insurance market was an option as well, but usually not a viable one — for most people it was tough or even impossible to do. Historically, insurers were allowed to turn you down or charge exorbitant prices if you had any medical history whatsoever. Sometimes having been treated for even minor ailments could lead to a denial of coverage.
But these days, there are alternatives. Under the Affordable Care Act, loss of job-based health insurance is considered a “qualifying life event,” which allows you to buy health insurance on the private market outside of the open enrollment period.
But how do you know whether you’re better off sticking with your current plan through COBRA or buying a new one?
Here are 5 factors to evaluate when determining how best to continue health insurance coverage after a job loss.
1. Mind the timeline. Once you lose your work-based insurance coverage, the clock starts ticking.
You have 63 days from the time the insurance you got at work ends to enroll in COBRA. You can wait the full period to enroll, but if you ultimately decide to take the coverage, you have to pay all of your premiums retroactively for the prior two months.
You have 60 days from the termination of your job-based plan to enroll in a private health insurance plan you buy on your own – whether through Healthcare.gov, an insurance broker or directly from a health plan. If you delay and miss these windows you’ll have to wait until the next open enrollment period to get coverage.
2. You may qualify for financial help. If your individual annual income is below about $ 46,000, or about $ 95,000 for families, you may qualify for help paying for your health plan. People with even lower incomes may also qualify for reduced out-of-pocket costs when they go for care.
3. Evaluate plan details. When deciding if COBRA or private insurance is the best option for you it pays to put your math skills to work.
There’s a good chance COBRA will be pricier, on a monthly basis, than a private plan you can buy on your own. But to understand what your overall costs are likely to be, you must look beyond the monthly premium. Also compare each plan’s out-of-pocket expenses, such as deductibles (which tend to be high on the private market), co-pays and co-insurance. Once you add everything up, you may be surprised to find that the less expensive plan can cost you much more in the end.
4. Consider staying put if you’re in treatment. COBRA may be the better option for people in the middle of medical treatment. If you’re undergoing chemotherapy, for example, sticking with your doctor and health plan – especially if you’re already on your way to meeting your plan’s deductible – may be your best bet.
And, since the open enrollment period now comes around once a year, you can finish out your treatment and buy a different plan for 2016 if your medical needs change.
5. Age is a factor. Insurers selling policies to individuals are allowed to charge more for coverage based on a person’s age. That’s generally not the case with most employer-based plans.
That means younger people are likely to find a less expensive plan on the private market. As you get older, however, COBRA may be the better bet. Again, you need to do the math.