Losing your job or making a career transition is stressful — and can knock you for a loop like a punch to the solar plexus. Then there’s the added pressure of securing health insurance until you land a new job, or a new employer’s coverage kicks in.
In the past, many people avoided a gap in healthcare coverage under COBRA, the law that allows you to stay on your former employer’s group healthcare plan, generally for 18 months, provided you pay the premiums.
With the Affordable Care Act (ACA) in place, however, a marketplace plan may offer a better — and cheaper — option.
With the annual open enrollment period of November 15, 2014, through February 15, 2015 — it’s a good time to weigh your health insurance options, especially if you’re currently covered under COBRA.
Here are three reasons you might want to trade in your COBRA policy for an ACA marketplace plan.
1. Your monthly premiums may be lower
COBRA coverage can be expensive, and that’s because you’re responsible for the full premium.
That means the portion you were paying as an employee plus what your employer had been contributing (usually about 70% of the cost), as well as a 2% administration fee.
If you’re currently covered under COBRA, the open enrollment period will give you the opportunity to switch from your former employer’s plan to a marketplace option, which may offer more flexibility when it comes to coverage and premiums.
In addition to a choice of providers, there are also levels of coverage, organized into metal tiers of platinum, gold, silver, and bronze.
The platinum and gold tiers have higher premiums but cover around 90 and 80%, respectively, of healthcare costs, while the silver and bronze plans have lower monthly premiums but higher deductibles and copays.
Keep in mind that switching to a different plan may mean having to choose from a different network of approved providers and services.
If you’re receiving ongoing treatment, for example, and want to continue with your medical team, check to see if those doctors are covered under any ACA plan you’re considering.
2. You may be eligible for tax subsidies
A marketplace health plan “could be a lot cheaper, particularly with tax credits,” says Ivan Williams, GetInsured’s senior policy analyst.
About 26 million Americans are eligible for tax credits from the government to help pay for health insurance premiums, whereas tax subsidies are not available under COBRA.
“You’ll be able to drop COBRA coverage during open enrollment and sign up for marketplace coverage with tax credits, if you qualify for them,” Williams says.
The government bases qualification for tax credits on household income, as well as how many people are part of the household and their ages.
Those eligible can either apply the credit to their monthly premium (in some cases, reducing the cost to $0) or opt to pay the full premium and receive a credit when they file their next tax return.
You can also choose to receive some credit toward your monthly premium and the rest when filing taxes. To estimate possible tax credits, use calculators available at GetInsured.
3. A new year typically means a new deductible
Many, but not all, annual health insurance deductibles are based on the calendar year, not a year from when your coverage began.
Whether you’re currently insured through COBRA or a marketplace plan, you’ll probably be responsible for a new deductible around the beginning of 2015.
When you begin a new health insurance plan, you’re responsible for a whole new deductible, regardless of the time of year or how much you’ve already paid toward your previous plan’s deductible.
So maybe you opted to keep your COBRA coverage when you could have switched mid-year (the deadline to change from COBRA to an ACA plan was extended to July 1).
“After all, who wants to lose the money they’ve already paid toward an annual deductible and start from scratch?” Williams says.
If your deductible is going to reset as the New Year rings in no matter which plan you have, you might as well see if you can get equally good coverage for a lower cost.
Those who enroll for a marketplace plan by December 15 will have coverage beginning January 1.