Can I get benefits through Obamacare when COBRA runs out?

Question: I quit my job last year to start my own business. I was happy with my company's healthcare plan, so I continued it through COBRA. But now I'm wondering if I could save money by using Obamacare instead. And, my COBRA coverage is going to run out in about six months anyway. Can I get health insurance through Obamacare when my COBRA benefits run out? Can I switch to Obamacare while I still have COBRA coverage?

Answer: The interplay between COBRA health insurance coverage and Obamacare coverage has been a bit confusing. However, the Obama administration has issued regulations that clarify the relationship between these two ways to get health insurance.

COBRA (an acronym for the Consolidated Omnibus Budget and Reconciliation Act) gives employees and their dependents the right to continue their health insurance coverage after certain events that would otherwise cause coverage to end. Employees who lose or leave their jobs, or whose hours are cut below the threshold their employer has set for benefits eligibility, can opt to continue receiving their employer-provided coverage for up to 18 months. Dependents who rely on an employee for coverage can also continue benefits in these circumstances, for up to 36 months. (Dependents also have the right to continue benefits if they would otherwise become ineligible due to divorce or death of the employee.)

COBRA was passed in the 1980s. At that time, insurance companies were free to refuse to cover pre-existing conditions and even refuse to provide coverage at all to high-risk customers. One of the purposes of COBRA was to allow people to keep their benefits, at least for a while, at a more reasonable cost. Employees (or their dependents) must pay the entire premium for COBRA coverage, including whatever portion the employer used to pay. But this was sometimes less expensive than an individual policy; for some people, it was the only way to get insurance.

Now that Obamacare has passed, COBRA has some competition. You can't be denied for pre-existing conditions, and premiums may be based only on your age, your geographical area, and whether you smoke. Therefore, like you, many people are wondering whether Obamacare might offer a better deal than COBRA coverage.

You can do some comparison shopping at the federal government's Health Insurance Marketplace; if your state has its own health insurance exchange, the federal site will send you there. After plugging in some basic information, you can compare available plans and pricing.

If you decide to switch from COBRA to Obamacare coverage, you have two opportunities to do so:

  • During open enrollment. Every year, there's an open enrollment period for Obamacare, when you can change your health insurance coverage. During this period, you can sign up for Obamacare even if you are still eligible for COBRA. (To find out when the next open enrollment period is, see COBRA Coverage and the Marketplace.)
  • When your COBRA coverage ends. Under Obamacare, when you lose your health insurance coverage (including when COBRA runs out), you get a special enrollment period. You have 60 days to enroll in Obamacare coverage, even if your COBRA coverage ends outside of the regular open enrollment period.
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