COBRA is Usually No, But Never Say Never

The Closest to Ukraine? Europe, Obviously

COBRA Is Usually A No, But…

If your ex-employer has greater than 20 full-time employees, then you have the right to COBRA. That period lasts, in most situations, for eighteen months.

The issue is that you have to pay the full ‘sticker price’ for the coverage. You might be shocked at the cost, many are. For those who are not compensated in wages/salary, it can easily be the case that much of the compensation is, in fact, due to this single benefit, which can easily exceed $20,000 a year for a couple/family.

So now what?

You have the unrestricted right to enroll in individual health insurance, and receive the APTC (Advance Premium Tax Credit) if you qualify. There are deadlines, so you cannot sit on your hands in making a decision.

You have the right to pay the COBRA premium (which can include a 2% administrative fee).

First Things First

The COBRA coverage itself is not necessarily a negative, large employer-sponsored plans can have lower deductibles, out of pocket maximums and lower coinsurance than plans available in the individual market.

If you are eligible for the APTC, that can become irrelevant, because the premium under the ACA could be so dramatically lower, that the coverage differences do not matter. This is the important takeaway here. Jae’s Corner never advocates “use all your money to pay for insurance that you may or may not need.” However, the point is that you need to actually calculate (nothing fancy, adding and subtracting will do).

“It’s like gambling”: that is what some people say. They are those who cannot or will not do the adding or subtracting. If you are Mr Perfect or Mr Sickalot, then you will have very very different view points on the premium differences. To Mr Perfect, who is APTC-eligible, it is most likely that COBRA is a no.

The differences here can be greater than $10,000 a year in premiums, this isn’t a small number. You notice that financial people like to talk about “sequence risk,” which occurs when you lose a lot at the beginning. They somehow forget to mention the other side of the coin: I am describing a sequence gain, not a sequence loss.

It is usually the case that you cannot transfer any payments that you have made to your deductible to a new policy. There can be exceptions but they would be very rare.

When COBRA Might Be Best

I didn’t say never, y’all know better. There are times that COBRA is best, they are NOT trivial.

If you have serious illness (you or someone else covered), and it requires known, ongoing healthcare services, you need to actually CHECK the fine print, because the out-of-pocket maximum can be notably lower than the out of pocket maximum in an ACA-compliant plan.

If your employer pays the COBRA premium, as a result of corporate reorganization.

If you live in a very expensive healthcare state, and your employer has employees in multiple states. We spend time in cherry-picking (when I wear that particular hat), so it can be that COBRA is actually less than the APTC-adjusted premium because of the fact that you live in AZ, NY, FL, TX? Yes that is entirely possible.

Medicare and COBRA

So the world has adjusted slightly and Medicare and You is incomplete on this topic. The employers can discontinue your right to COBRA when you turn 65. The important thing is to check with the employer to see if your family can remain on COBRA, after you become Medicare-eligible.

COBRA will work, but not forever. Medicare and You is correct in that COBRA doesn’t count as “health insurance.” BUT, you can have an 8-month period “without” health insurance according to Medicare. SO, when you add up the complicated moving parts, can it be that you can use COBRA for 7 months, and then enroll in Medicare? Yes. The single, unlikely caveat: you need to make sure that your prescription benefits count as Creditable Coverage, or else you would face the Part D Late Enrollment Penalty.

Mishandle these details? Late enrollment penalties and delays in getting Medicare coverage await you.

Handling COBRA Yourself?

Ultimately, this is cost versus your private reasons for owning health insurance. You may have a specific reason that is the singular decision-making fact, rendering all other details irrelevant.

This is just a partial list of moving parts. Everyday people are unlikely to know this set of facts independently, and your situation can be variations, which would completely change your conclusion. Tough stuff, among the most complicated situations regarding health insurance.

Even Bigger Than Bonds? Foreign Exchange (not financial advice, dyor)

It doesn’t matter, until it does. And you can be affected by this, whether you realize it or not. Foreign exchange is the largest market in the world: bonds don’t even compare.

Here’s the 12-month graph of the Euro vs the USD. The reason this matters is that a diversified global portfolio is likely to include “international” assets. The issue is that they need to be re-translated into USD terms.

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