Is There a Cheaper Alternative to COBRA?

When you lose employer-sponsored health insurance, continuing coverage through COBRA can be very expensive. COBRA allows you to keep your same plan for 18-36 months, but you pay 100% of the premium plus a 2% administrative fee. This can cost $500-$2000 per month for family coverage. Fortunately, there are cheaper alternatives to COBRA you can consider.

Overview of COBRA Coverage

First, let’s review some key points about COBRA:

  • COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. It’s a federal law that requires employers to allow employees to continue group health coverage after being terminated or losing eligibility.

  • You must be given 60 days to elect COBRA after losing job-based coverage. The coverage is then retroactive to your last day of employment.

  • COBRA lasts for 18-36 months, depending on the qualifying event. You pay the full premium plus a 2% administrative fee.

  • Coverage ends when the 18-36 month period is up. You can lose COBRA early if you become eligible for other group coverage or Medicare.

  • You can keep the same plan you had while employed, with the same benefits and provider network.

  • The catch is COBRA is very expensive since your employer no longer pays a share of premiums. You pay 100%.

For many people, paying $500-$2000 per month for COBRA coverage is simply unaffordable. Are there alternatives that can provide coverage at a lower cost? Absolutely. Here are your options.

Health Insurance Marketplace Plans

One alternative to COBRA is purchasing insurance through the Health Insurance Marketplace in your state. Here are some key points about this option:

  • Marketplace plans offer comprehensive coverage similar to employer plans. All Marketplace insurance covers essential health benefits.

  • You have a 60 day special enrollment period after losing job coverage to enroll in a Marketplace plan. This overlaps with the COBRA election period.

  • Costs are based on a sliding scale depending on your income. Those with lower incomes get larger subsidies to reduce premiums and out-of-pocket costs.

  • Shop and compare plans on the Marketplace during open enrollment or your special enrollment window. Look for an affordable premium within your budget.

  • Marketplace enrollment is year-round – there is no limited window to enroll. You can get coverage any month of the year.

For many who lost employer coverage, Marketplace plans offer comparable benefits at a lower monthly cost than COBRA. Shop plans, compare costs, and enroll within 60 days of losing your job-based insurance.

Medicaid Coverage

Another potential alternative to COBRA is enrolling in Medicaid. Here are some things to know about Medicaid:

  • Medicaid provides free or low-cost health coverage to millions of low-income individuals and families.

  • You must meet income and asset limits in your state to qualify for Medicaid. Eligibility thresholds vary by state.

  • Medicaid offers comprehensive benefits including doctor visits, hospital care, maternity coverage, mental healthcare, prescription drugs and more.

  • There is no monthly premium for Medicaid – it is generally free if you qualify. There are also no deductibles.

  • You can apply for Medicaid anytime – there is no limited enrollment period. You can be accepted anytime of year if you meet eligibility standards.

  • Apply through your state Medicaid agency, or through the Health Insurance Marketplace website/app. You find out rapidly if you’re approved.

For low-income individuals, Medicaid can provide full health benefits for free or very low cost, which is much cheaper than COBRA.

Spouse or Parent’s Employer Plan

Adding yourself to a spouse or parent’s employer health plan is often cheaper than electing COBRA. Here’s what you need to know:

  • During a special enrollment period, you can join a spouse’s employer plan within 30 days of losing other coverage.

  • Premiums to add a spouse are generally cheaper than individual COBRA payments. Employers subsidize premiums.

  • You can be on your parent’s plan until age 26 in most cases, if the plan has dependent coverage.

  • Adding yourself to an employer plan has defined open enrollment periods, unlike the Marketplace or Medicaid.

  • Make sure your medications, doctors, and hospitals are in-network to avoid higher costs. Ask for a provider directory.

  • Employer plans have plan documents detailing cost-sharing like deductibles and copays. Review these closely.

For young adults and married couples, jumping on an employer plan may provide the most affordable alternative to continuing expensive COBRA coverage. Crunch the numbers to see which option saves you the most money.

Short-Term Limited Duration Insurance

Short-term health plans provide temporary coverage gaps for those between jobs or insurance plans. Here’s an overview:

  • Plans typically last 3-12 months and can be renewed for up to 36 months in some states.

  • Read the fine print carefully. These plans can exclude pre-existing conditions or impose dollar caps on coverage.

  • Premiums are generally much lower than Marketplace or COBRA premiums.

  • Short-term plans have less comprehensive coverage. Many exclude prescription drugs, maternity care or mental healthcare.

  • There is usually a medical questionnaire required to qualify for short-term coverage. Those with health conditions may not qualify.

  • Shop carefully, read the fine print, and understand these plans can exclude much of what comprehensive insurance covers.

For healthy applicants with no pre-existing conditions, short-term plans can provide bare bones coverage at low cost. However, read all exclusions carefully. These plans leave you unprotected for many health services.

Christian Healthcare Ministries

Christian Healthcare Ministries (CHM) provides a health cost sharing program that serves as an alternative to insurance. Here’s an overview of this option:

  • CHM has members share healthcare costs for other members who have eligible medical bills.

  • To join, you must commit to living Christian values including attending church regularly.

  • CHM membership costs $150-$300 per month depending on the coverage level you choose. This cost shares bills up to $125k or unlimited.

  • You must be healthy to join – there are no pre-existing condition provisions. Medical history can disqualify you.

  • Bills are only shared for eligible medical expenses as defined in member guidelines. Make sure you understand what’s included.

  • CHM is not legally defined as insurance. It does not guarantee payment of medical bills. Read the details carefully before joining.

For devout Christians who are healthy and understand the coverage limits, CHM provides an alternative to traditional health insurance at relatively low monthly rates. However, it does not legally obligate payment for bills the way insurance does.

Weighing COBRA vs. Alternatives

When deciding between COBRA and other options, here are some key factors to consider:

  • Cost – Compare monthly premiums. Factor in subsidies and employer contributions that lower costs.

  • Benefits – Make sure alternate plans cover your medications, doctors, hospitals and health services. Avoid plans with exclusions.

  • Provider networks – Ensure your healthcare providers participate in the new plan’s network to avoid out-of-network costs.

  • Drug formularies – Check that needed prescriptions are covered and affordable under drug formularies.

  • Plan features – Confirm deductibles, copays, coinsurance are affordable. Also understand rules for referrals and pre-approvals.

  • Application requirements – Factor in health questionnaires, income documentation needed to qualify for alternate coverage.

  • Duration – Short-term plans have time limits. Make sure longer term coverage is available if needed.

With research and side-by-side comparisons, you can find the optimal health plan that fits your budget and coverage needs as an alternative to expensive COBRA.

Frequently Asked Questions

What is the cheapest alternative to COBRA?

The cheapest alternatives are typically Medicaid or subsidized Marketplace plans. Those with low incomes pay little to nothing for Medicaid. Middle income families can qualify for tax credits to lower Marketplace plan premiums.

Can I enroll in Medicare instead of COBRA?

If you’re 65+ and eligible for Medicare, you can enroll in Medicare Part A & B instead of electing COBRA. This may be much cheaper, but make sure your providers accept Medicare.

Is COBRA better than the Health Insurance Marketplace?

Not always. Subsidized Marketplace plans can cost much less in premiums for those who lost job-based health coverage. But if you have higher income, COBRA may be cheaper than unsubsidized Marketplace premiums.

What are the main disadvantages of COBRA coverage?

The biggest downsides of COBRA are it only lasts 18-36 months and it is incredibly expensive since you pay 100% of the premium. Marketplace and Medicaid options

There are Affordable Alternatives to COBRA | Testimonial | Agents for Hope


Is it better to get COBRA or marketplace?

Not only are Marketplace plans less expensive than COBRA, 80% of people will usually qualify for financial help from the government (called a subsidy) to help pay their premium.

What do I do if I can’t afford COBRA?

If COBRA doesn’t work for you, the Health Insurance Marketplace is a great health coverage option for both individuals and families. Many states run their own health exchanges where you can shop, compare and enroll in a plan that works best for you and your budget.

How can I avoid paying COBRA?

If you want to avoid paying the COBRA cost, go with a short-term plan if you’re waiting for approval on another health plan. Choose a Marketplace or independent plan for broader coverage. Choose a high-deductible plan to keep your costs low.

Is there cheaper insurance than COBRA?

Typically ACA insurance is more affordable than COBRA insurance because you can be eligible for federal ACA subsidies, depending on your income.

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