Ohio Mom in comments raised a good question in a touch situation:
The issue is, in a nutshell, he lost his job last Wednesday. HR is saying he is covered for rest of January (whoppee, four more days) and can get COBRA coverage but will not receive the sign-up information for up to two weeks…
I (Ohio Mom) turn 65 on March 13 and already have appointment with Medigap/Part D counselor to choose plans.
Ohio Dad turning 63 in March.
Maybe we should go with Obamacare instead of COBRA?
Fundamentally, the question is what are the trade-offs between COBRA and the ACA?
This is a damn good question.
COBRA is a continuation of group coverage where the beneficiary and any dependents have the option to pay 102% of premium to continue their coverage after a qualifying life event. There is no underwriting and the coverage will retroactively start to the date of the termination of the regular coverage once the initial election and payment is received. COBRA coverage keeps the already paid deductible and out of pocket cost sharing counted. For instance if there is a $5,000 deductible for the calendar year and Ohio Dad had a $2500 test in January that hit the deductible under his base plan, he would still only owe $2500 in additional deductible on a COBRA policy between February 1 and December 31. COBRA can be elected or turned down by each covered individual.
The loss of a job and loss of group insurance coverage is a qualifying life event for the ACA and can trigger a special enrollment period. The ACA exchanges offers community rated, guarnateed issued insurance with premium subsidies for folks earning between 100-400% FPL if they are not Medicaid qualified. A new ACA plan will not recognize already spent deductibles and cost-sharing even if the insurer selling the ACA plan is the same insurer offering the work plan.
One last note; COBRA insurance is pure community rating; everyone, no matter their age, who purchases a given plan pays the same premium while the ACA is modified community rating where gross premiums increase by age.
So what is the best choice?
It depends!
The major variables are time of the year, amount of cost sharing left on the COBRA plan, hassle/transition costs, age and eligibility for ACA subsidies.
A 21 year old who has no claims in their work insurance who is COBRA eligible in February and is eligible for big ACA subsidies is likely better off in the ACA individual market as they are likely to see a low to no premium Bronze plan that they are unlikely to use as they are statistically likely to be as healthy as a horse anyways.
A 64 year old who has already maxed out their deductible when they became COBRA eligible in February, makes too much for ACA subsidies and has a knee replacement surgery scheduled in March will likely be better off in COBRA.
Why?
That 64 year old is paying full premium for either COBRA or the ACA. They are likely to be one of the older and statistically likely to be more expensive people in either pool. The COBRA premium is the age blended premium of everyone in the company so the average age of premium payers might be late 30s or early 40s. The ACA premium is at its maximum for a 64 year old. For comparable plans, the ACA plan is likely to be more expensive in premiums plus the cost-sharing restarts at zero so it would be a double whammy.
Fast forward everyone to COBRA eligibility starting in December it is a one month calculation of : difference in COBRA and ACA premiums + difference in expected cost sharing — choose whichever is lower.
COBRA also minimizes learning costs. You’re keeping the same plan with a new ID card and nothing else changes. That can be valuable for folks who have spent a significant amount of time learning their insurance company due to high needs. It is far less valuable for someone who has not seen a doctor in three years.
So, as always, it depends.
