The Cobra Loophole 60 days option allows recently unemployed individuals to continue their employer-sponsored health insurance coverage for up to 60 days. This can provide important protection if you’ve lost your job and health insurance.
If you’re short on time, here’s a quick answer: The Cobra Loophole allows you to extend employer health insurance for 60 days instead of the typical 18-36 months offered under Cobra. We will cover what Cobra is, eligibility requirements, costs, and strategies to make the most of the 60 day Cobra Loophole option.
In this comprehensive guide, we will explain everything you need to know about the Cobra Loophole 60 days option for continuing health insurance after job loss.
What is COBRA?
COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that allows eligible employees and their dependents to continue receiving health insurance coverage under their employer’s plan for a certain period of time after leaving their job. Here are some key facts about COBRA:
Basic Definition of COBRA
COBRA is a temporary extension of employer-provided group health insurance. It allows employees and their families to continue their same health coverage for 18-36 months after experiencing a qualifying event such as voluntary or involuntary job loss, reduction in hours worked, transition between jobs, death, divorce, and other life events.
Key Facts and Statistics
- COBRA applies to employers with 20 or more employees.
- Coverage can last for up to 18 months after job loss or reduction of hours. It may last up to 36 months for other qualifying events.
- Individuals pay 100% of the health insurance premium, plus a 2% administrative fee.
- In 2020, only 28% of eligible individuals opted for COBRA after job loss, likely due to the high cost of premiums.
How it Works After Job Loss
Here is the typical COBRA process when someone loses their job:
- The employer notifies the health insurance plan administrator within 30 days of the employee’s job loss.
- The administrator then sends the employee a COBRA election notice within 14 days.
- The former employee has 60 days to elect COBRA coverage.
- Once elected, COBRA coverage is retroactive to the last date of the employee’s job.
- The individual pays the full cost of the premium (employer contribution ceases) plus a 2% administrative fee.
- Coverage extends for 18 months after job termination.
- COBRA coverage ends when the 18-month period expires.
The COBRA law gives workers and their families continued access to health insurance during times of transition. While premiums are often high, COBRA serves as an important temporary safety net. For more details see the U.S. Department of Labor website.
Cobra Loophole 60 Days Explained
What is the Cobra Loophole Option?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) loophole allows employees who have recently lost their jobs to continue their employer-sponsored group health insurance coverage for up to 60 days after leaving their job.
This coverage extension gives people extra time to find new insurance options after a job loss.
Normally, employer-sponsored health insurance ends on the last day of employment. But with COBRA, people can choose to extend their workplace coverage temporarily. This is intended to prevent gaps in health insurance during transitions between jobs.
Eligibility Requirements
To qualify for the 60-day COBRA loophole option, you must have had employer-sponsored group health insurance that you’ve lost due to termination of employment. Voluntary resignation doesn’t qualify. You’re eligible as long as you haven’t been fired for gross misconduct.
The 60-day extension applies both to employees and any dependents covered under their employer plan, such as a spouse or children. Everyone who was enrolled can continue benefits temporarily under the loophole.
Costs and Premiums
For the 60 days of extended coverage under COBRA, you don’t have to pay premiums. Your normal payroll deductions for health insurance stop when you leave your job. The employer pays for maintaining coverage during the loophole period.
After 60 days, you can choose to continue COBRA coverage by starting to pay premiums yourself. The cost is usually higher than what employees pay, since employers often subsidize health plans. You may pay 100-102% of the total premium costs.
How to Enroll and Use It Strategically
You don’t have to enroll or sign up to take advantage of the 60-day Cobra loophole extension. Coverage continues automatically for that period. But it’s smart to verify with your employer that you still have benefits.
Strategically, the loophole gives you time to find a replacement insurance option. You could enroll in a spouse’s plan, shop for Individual health insurance, or research plans on the Health Insurance Marketplace.
Having 60 days prevents gaps in coverage while assessing the best new plan for your situation.
Strategies to Make the Most of Cobra 60 Days
Compare Plans and Costs
When faced with the need for transitional health insurance, one of the first things to do is compare your Cobra plan details and costs to other options. Cobra can be an expensive route, with recipients paying the entire premium themselves rather than sharing costs with an employer.
Carefully weigh Cobra against alternatives like ACA marketplace plans or short term health insurance to see which makes the most financial sense for your situation.
Tools like the ACA plan finder allow you to preview different plan benefits and calculate subsidies that may be available. Knowing what you’ll be responsible for paying under different scenarios can steer you towards the most affordable stopgap measure.
Consider Alternatives Like ACA Plans
Cobra is not the only health insurance choice for those between jobs or facing other qualifying events. ACA-compliant major medical plans available through federal and state marketplaces may be more affordable and provide better coverage, especially if you qualify for premium tax credits.
Unlike Cobra plans which typically expire after 18 months, you can enroll in an ACA plan anytime, with noduration limit. Special enrollment periods after losing workplace insurance also guarantee access regardless of open enrollment periods.
Use As Stopgap Until New Job Insurance Kicks In
If you’ve already secured new employment starting shortly, electing Cobra coverage can prevent gaps between your old workplace policy and new employer health benefits. Most company health plans impose 60-90 day waiting periods before insurance activates, leaving you vulnerable in the interim.
Activating Cobra allows you to bridge this gap at your own expense.
According to 2022 research, over a quarter (27%) of Cobra enrollees use it as temporary coverage before transitioning to another form of insurance later on. Just be sure to cancel Cobra once your new workplace coverage kicks in to avoid paying unnecessary premiums for duplicate policies.
Frequently Asked Questions
Can Cobra Be Extended Beyond 60 Days?
Unfortunately, COBRA continuation coverage is limited to a maximum of 18 months. There are a few rare exceptions where coverage can be extended an additional 11 months due to disability, giving a total of 29 months of COBRA coverage.
However, the general rule is that COBRA will end after 18 months, even if you still need health insurance.
Some options after COBRA expires include enrolling in a Marketplace health insurance plan, joining a spouse’s plan, or applying for individual health insurance. However, there may be gaps in coverage, so it’s important to start planning for life after COBRA well before your 60 days are up.
What If I Have Preexisting Conditions?
One benefit of COBRA is that it allows you to keep your same health insurance plan, meaning your preexisting conditions will still be covered. This prevents gaps in care or coverage while transitioning between health plans.
However, once your 18 months of COBRA ends, you’ll need new insurance. Marketplace and individual plans are required to cover preexisting conditions too, but it’s important to carefully review plans to ensure your medications, doctors, and treatments will still be covered.
Check if new plans cover care from the same hospitals and providers you currently see. Also confirm expensive prescription medications are included on formularies. This will help ensure a smooth transition to new insurance with minimal disruption to your healthcare.
Are Dependents Eligible Too?
Yes, if you elect COBRA continuation coverage for yourself, your spouse and dependent children are also eligible for COBRA. Coverage lasts up to 36 months for dependents.
The cost will likely increase, since dependents are included. However, COBRA may still be more affordable than seeking individual plans for each family member. It also allows dependents to maintain coverage, providers, and treatment plans rather than disrupt care.
One thing to note is that dependents may have other options like parental plans or the Marketplace once you enroll in COBRA. So, weigh costs and coverage carefully when deciding if COBRA is best for the whole family.
Expert Tips for Navigating Insurance After Job Loss
Losing your job can be an incredibly stressful and uncertain time. One major concern that arises is what will happen with your health insurance coverage. Navigating your insurance options after job loss can be confusing, but there are some expert tips that can help.
Understand Your COBRA Coverage
One option you likely have is to continue your workplace insurance through COBRA. COBRA allows you to keep the same coverage you had through your employer for up to 18 months, but you’ll have to pay the full premium yourself.
This can be expensive, but may make sense if you’re mid-treatment or have doctors you want to stick with.
Look Into Your State’s Options
Many states offer transitional insurance plans for those who lose employer coverage. These state-based options may be more affordable than COBRA. Do your research to see if your state has a bridge or transitional plan you could enroll in.
Consider Medicaid or the ACA Marketplace
Depending on your income level and household size, you may qualify for Medicaid. This public health insurance program is free for those who meet eligibility criteria. The Affordable Care Act (ACA) Marketplace also offers income-based subsidies on private plans.
Compare your options here based on coverage needs and budget.
Explore Job-Based Coverage
If your spouse has insurance through their employer, talk to their HR department about getting on their plan. You may need to act quickly, as there is usually a 30-day special enrollment period after losing other coverage.
If you take on part-time or contract work, ask about health insurance options as well.
Look Into Catastrophic or Short-Term Plans
Catastrophic and short-term health plans are not comprehensive, but can offer temporary coverage in a crisis. Catastrophic plans have low monthly costs and only kick in after you meet a high deductible. Short-term plans provide coverage for up to 12 months.
These bare-bones options can work as a stopgap.
Use Health Savings Accounts if Available
If you have a Health Savings Account (HSA) from your previous job, you can use these pretax funds to pay for medical expenses. HSA funds roll over year to year if you maintain an eligible high-deductible health plan. Use your HSA to help manage costs as you transition between plans.
Losing your job and health insurance simultaneously can be very destabilizing. Take it step by step, evaluate all your options, and don’t be afraid to ask for help. With some expert guidance and strategic planning, you can secure new coverage and get back on solid ground.
Conclusion
Losing employer health insurance after job loss can be tremendously stressful. The Cobra Loophole 60 day option offers a short-term solution to maintain coverage as you transition.
While affordable long-term alternatives may exist through ACA health exchanges or a new job, using the Cobra Loophole strategically can prevent gaps in healthcare coverage.
