Should you go for COBRA insurance?
Imagine yourself as a dedicated worker for a Multi-National Corporation. You have slaved almost a decade for this company, and this company has rewarded you with many benefits, amongst them a heavily-subsidized health insurance plan for your entire family.
Then, recession struck. You were one of the casualties of this relentless economical force, and have been retrenched by your manager. You are now officially no longer part of the company, and all benefits would have been stripped for you.
This pops one question into mind: What about the health insurance for your family? Won’t your family no longer be insured by the company’s health insurance, leaving your entire family vulnerable to medical emergencies which could leave you stuck in a financial quagmire?
Well, you’re in luck; you won’t necessarily be exposed financially because of the COBRA insurance scheme.
What is COBRA insurance?
A name that reminds most of us of GI-Joe, COBRA stands for Combined Omnibus Budget Reconciliation Act. This act allows the employee, who has ceased employment with his or her previous employer, to continue being insured under the company’s employer-subsidized health insurance policy. However, the employer is expected to pay the full premium of the health insurance, in addition to a 2% administrative charge (which may be waived by your employer).
In essence, this means that the insurance policy that has insured you when you were employed under your previous employer will still be in effect even after the end of your employment. However, you can only benefit from this health insurance package up to a maximum of 18 months under normal circumstances.
When am I eligible for COBRA insurance?
You will be eligible for COBRA insurance if your previous employer has hired more than 20 employees in the preceding year. There, when you are retrenched or otherwise rendered unemployed by your previous company, your employer will inform you of the COBRA insurance scheme, whereby you will be allowed up to 60 days to decide if you will take up this act. However, you will have automatically voided this act, and the health insurance subsidized by your company after the 60 days dateline is past. You can cease the COBRA insurance at any point of time.
Should I take up COBRA insurance?
You can obviously see the benefits of COBRA insurance – when you’re unemployed, you or your family can still be insured by the health insurance plans from your ex-employer (albeit unsubsidized). However, the extra premiums that you must pay will be a hefty burden to you, especially when you are already unemployed. So, when should you take up the offer – and when should you reject it?
If you’re deciding to be self-employed, or otherwise not be employed under another company that will provide you or your family with subsidized health insurance, this is the time to take up a personal health insurance scheme, or rope in your entire family to be insured by a single family health insurance policy. As the COBRA insurance will cost a hefty premium per month (as your company’s health insurance package provided to you is no longer subsidized by your employer), you should instead go for a more permanent package – the COBRA insurance will expire in 18 months.
However, you’re planning to be employed under another firm that has a similar subsidized health insurance package, you should take up the COBRA insurance. The COBRA insurance will serve as a temporary insurance scheme to tide you over your period of unemployment – you’ll cease the COBRA insurance once you have taken up your new employer’s health insurance package.
If I don’t take up the COBRA insurance, what other options do I have?
If you’re planning to reject COBRA, you will have to find a private health insurance policy to insure yourself from medical emergencies. This step is a must – never expose yourself to uncertainty, as it might cost you financially when the emergencies do happen. However, be prepared for the flood of administrative procedures; you will be required to go for health check-ups, send the insurance company your family history of hereditary diseases, fill up forms, go for interviews…
You might also want to add yourself into your existing family insurance scheme. This way, you get to lower the premium of the insurance scheme, and you’ll enjoy the benefits as well. This solution is by far the best solution, as it allows you to enjoy the coverage of health insurances at a lower premium.