Losing Your Health Insurance: 8 Things You Need to Know Before You Go On Cobra

3661635778 a7793d730cIf you're thinking of leaving your job, Cobra may seem like the one part of our screwy health insurance system that actually works. Named for the health insurance provisions in the 1986 Consolidated Omnibus Budget Reconciliation Act, Cobra ensures that if you leave your job, you won't also lose your employer-sponsored health insurance. In most cases, you'll get 18 months coverage on your employer's plan before you've got to come up with other arrangements.

If only it were that simple. It's distressingly easy to be thrown off of Cobra for no reason at all, and you can count on getting plenty of bad information while you're trying to get reinstated. Here's what you need to know to make sure your health insurance coverage continues, even if your job doesn't.

First, the basics.

Cobra is expensive. In most cases, Cobra allows you to stay on your employer's health insurance plan. But your employer is no longer going to be paying for it. In 2010, the National Conference of State Legislatures estimated that the cost for Cobra coverage for a family was $13,375.

If, while you were employed, your company deducted $500 a month from your paycheck to cover the cost of health insurance for you and your family, the chances are the company was also paying the insurer about $800 on top of that.

If your company goes belly-up, forget it. This is the really, really bad thing about Cobra. If your former employer goes out of business, you're not going to be able to go on Cobra, either. Think about it: Cobra lets you stay on your former company's health insurance policy. If there's no company, there's no policy.

Now, the zinger.

You are very likely to be kicked off Cobra. Even if you've been paying your premiums. The first time you go to the doctor after going on Cobra, you will probably be told you have no coverage. Don't freak out. And while it's probably not a bad idea to check your bank account, those big checks you've been writing have most likely cleared. As Diana Mazariegos, the office manager for a busy New Jersey pediatrician's office, says, "If someone tells me they're on Cobra, I already know what's going to happen. I submit the claim, and it gets denied."

Even once you're on Cobra, you can be kicked off for no apparent reason. Before going on Cobra, you only had to deal with the insurance company if something went wrong. On Cobra, there's a third-party administrator to deal with, too. (That's usually who you'll be writing your checks to.) While you wrestle with the insurance company, the doctor's office and the administrator to figure out who's at fault, you don't have any insurance. More than half the time, Mazariegos believes, "The Cobra administrator gets paid, but it doesn't get put through to the insurer." When my daughter got kicked off Cobra, the representative from ADP (the administrator in my case) said it was because of "a computer glitch," which is the same explanation Mazariegos says she often receives. ADP did not return a call for comment for this story.

If you're at the doctor's office when you find out you have no insurance, they'll probably give you time to get it sorted. They know this happens. If you find out from the pharmacist — who expects to be paid right away — it's a much bigger headache.

What can you do to increase the chances this will all go smoothly?

  1. Plan ahead. If you're worried about losing your job, you may want to consider a less-expensive health-insurance plan. Dropping from the most expensive plan to the least expensive may only save you $100 a month while you're employed – but if you lose your job and have to pay full freight, it may save you several times that. To get the exact figures for your company's plans, call your human resources department and ask what the "Cobra cost" of each plan is. Generally, you can only change health insurance options during open enrollment or if you have a 'life event' such as marriage or birth of a child, so it's important to think ahead.
  2. Once you do go on Cobra, tell your doctor's office right away. That way they'll know what to expect. If a claim gets denied, they may resubmit it before sending you another (confusing) bill, or at the very least give you a heads' up.
  3. Get a proof-of-mailing certificate from the post office when you mail your premium payment. If your payment is late, you will lose coverage. Game over. And some Cobra administrators don't send out payment stubs until the payment is almost due. So keep an eye out for that stub in the mail, and get some proof you mailed your payment on time. A few administrators will let you pay online.
  4. If you get kicked off Cobra, stay calm. With enough phone calls, you can get your insurance reinstated, and it will be reinstated retroactively so you won't have any gaps in coverage. "You have to stay on them," Mazariegos says. "Call, call, call. Fight, fight, fight. If it were up to them they'd get away with this with everyone." Don't let them.

If you're at the pharmacy, need medication immediately, and suddenly find you have no coverage, you have a few options. You can:

  1. Pay the retail price of the drug. This really stinks. It will take a lot of phone calls to get reimbursed once your coverage is reinstated.
  2. Work like crazy trying to get the problem cleared up immediately. "Immediately" can be 40 minutes or a few hours. Sometimes you will be told it can't be fixed same-day. Count on spending a lot of time on hold, talking to people in India, and asking to speak with supervisors.
  3. Ask your doctor for free samples while you get things cleared up.
  4. Ask your doctor if he or she will write the prescription in the name of another family member—one who hasn't been bumped off Cobra. For obvious reasons, physicians don't like to do this, and yours might not oblige. But if I were desperate, I'd try it.

Someone will probably email me and say that suggestion No. 4 is tantamount to asking the doctor to commit insurance fraud. I don't know what the legal answer to this is, but I'm confident in the ethical one. You've paid your insurance premium on time, in exchange for which the insurer has contracted to provide you with a certain level of coverage. When your coverage is denied because of a 'computer glitch,' and a doctor helps you get medicine you need, it's neither you nor the physician who should be worried about accusations of poor behavior. –K.W.

Photo courtesy of flickr users Jen and Tony Bot

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