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Alternatives to COBRA: 5 Alternatives You Haven’t Considered

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Gigly team, Marketing at Gigly
Woman reading insurance policy

Have you recently experienced a change in your life or career path that’s impacted your eligibility for group health benefits? Did you wonder if alternatives to COBRA exist?

If so, you’re one of many people who have recently been exploring COBRA coverage to extend their existing health benefits while transitioning into a new career phase.

You probably received information about COBRA when you enrolled in a healthcare plan with your current or former employer. Yet, if it didn’t seem relevant at the time, you likely didn’t pay much attention to the details.

Don’t worry:

We’re here to explain everything you need to know about COBRA health insurance and whether some of the available alternatives might be a better option for you and your family.

Ready to start with a few basics?

This section will help you fully understand COBRA so you can make an informed decision. Let’s go.


What Is COBRA?

COBRA is the acronym for the Consolidated Omnibus Budget Reconciliation Act, a term very few of us would be able to remember. So thank goodness for that acronym.

But what is COBRA, exactly?

In a nutshell:

COBRA creates an opportunity for many individuals and their families to continue their healthcare coverage temporarily after a qualifying life event changes their eligibility.

If it were that simple, however, you probably wouldn’t be here looking for answers to your questions about COBRA and alternatives.

So let’s cut to the chase and break down the details of COBRA, including:

  • Who it’s for
  • What it does
  • What else you can do to get health insurance benefits when your previous or existing coverage ends

Who is Eligible for COBRA?

COBRA coverage is available to anyone enrolled in a participating group health insurance plan (such as through an employer) until they experience a qualifying event that ends their eligibility.

A qualifying event may include changes like:

  • Job loss
  • Quitting a job
  • Transitioning to a different job
  • Reduced work hours
  • Leaving a job for personal reasons or retirement

Family members and dependents under the age of 26 enrolled in the employee’s plan might also be eligible for continuation of coverage through COBRA.

If so, these changes must be in place:

  • Marriage, divorce, or legal separation from the covered individual
  • Death of the covered individual
  • Specific changes in adoption or fostering status
  • The covered employee becomes entitled to medicare
  • A new job, job loss, or retirement of the covered individual

Do I Qualify for COBRA Insurance?

Whether or not you qualify for COBRA coverage depends on your unique circumstances.

These are a few of the most critical factors that are essential to your eligibility for COBRA:

  • You were enrolled in a group health insurance plan sponsored by an organization with 20 or more employees at the time of your qualifying event
  • Your previous plan is still in effect
  • Termination of your employment was not due to gross misconduct
  • You notify the healthcare plan administrator within 14 days of your qualifying event
  • You receive an election notice (written notice of your COBRA coverage rights and how to decide what’s right for you)
  • It has been less than 60 days since you received the election notice
Health insurance companies with participating COBRA plans are required to send you information about your eligibility during your enrollment. Check your health plan files for documents containing information about your COBRA options to save time.

Are There Alternatives to COBRA?

Insurance broker handing contract and pen to client

COBRA continuation coverage isn’t ideal for everyone.

Why?

First, the cost of COBRA premiums can be higher for the same plan and coverage.

That’s because you received the group plan price, and your employer paid part of the cost when you were an eligible employee.

Now, on a COBRA plan, you are responsible for the whole monthly premium.

Another key reason some people seek other options is that COBRA health insurance is only a short-term plan.

A COBRA plan can benefit those with a specific timeline for transitioning to a new job. It helps you maintain coverage until the open enrollment period (or a special enrollment period for new hires) arrives.

However, if you’re losing health insurance coverage through an employer to pursue self-employment or gig work, it may not be the best fit for your long-term needs.

Even if short-term coverage would work until you become more established in your new career phase, COBRA continuation coverage is often unaffordable for many freelancers and gig workers.

But we’ve got some good news.

Fortunately, COBRA isn’t your only option when life changes and you need health insurance apart from your former employer or a group health plan.

Let’s explore five of your other options if you aren’t sure whether COBRA continuation coverage is right for you.

1. Explore Obamacare Via the Health Insurance Marketplace (Healthcare.gov)

Before the Obama administration signed the Affordable Care Act (ACA) into law in 2010, about 44 million Americans didn’t have the insurance coverage they needed to access healthcare services.

Many uninsured individuals and families didn’t benefit from group plan pricing and an employer subsidy to offset the cost. Still, they made too much money to be eligible for Medicaid (the public healthcare plan available through the Federal Government).

Fortunately, the ACA provisions started taking effect in 2014.

Millions of previously uninsured Americans were finally able to apply for coverage, compare monthly premiums, and select a Health Insurance Marketplace plan at Healthcare.gov.

Also known as Obamacare, the Marketplace offers fantastic opportunities for gig workers and freelancers to get health insurance at an affordable price.

The Pros:

  • Health insurance is more affordable than ever and available to everyone
  • Insurance companies can’t drop you if you get sick
  • Insurance companies can’t put a cap on your annual benefits
  • They can’t deny you for pre-existing conditions
  • Prescription prices are lower
  • Increased access to screenings and preventative care

Keep in Mind:

  • You must enroll or change your current plan during the designated open enrollment period.
  • Your total cost will include your monthly premium as well as your deductibles, copays, and the percentage you owe for various healthcare services.
  • Consider how frequently you use your insurance to determine the best coverage option for your needs and budget.

2. Opt for a Private Health Insurance Plan

Getting private (or individual) health insurance coverage is similar to using Healthcare.gov because you select a new plan offered by a private healthcare company.

However, you won’t find these particular plans available in the Health Insurance Marketplace.

Instead of using Healthcare.gov to find your ideal health insurance plan, you can get quotes from individual insurance providers or work with an agent.

This type of policy usually benefits people who need short-term health insurance coverage outside of open enrollment but don’t qualify for a special enrollment period.

The Pros:

  • You can get coverage outside of an open enrollment period or sometimes during what’s called a special enrollment period.
  • The same American Care Act (ACA) protections apply, meaning you can’t be disqualified for coverage because of a pre-existing condition or dropped from your policy due to illness,

Keep in Mind:

  • Private and individual plans are rarely a low-cost option.
  • Private policies purchased outside the Marketplace and the open enrollment period do not qualify for a government subsidy, premium tax credit, or income-based savings benefits.
  • Even if your health insurance plan ends and you choose not to renew it, you won’t qualify for a special enrollment period through the Health Insurance Marketplace (you’ll need to wait for the open enrollment period).

3. Consider a High-Deductible Plan (and an HSA)

If the cost of COBRA health benefits is too high for your budget, you’re not alone.

That’s why one of the most popular COBRA alternatives is a high-deductible plan with a low monthly premium.

With this coverage option, you’ll save on your monthly expenses if you’re healthy and use your health benefits infrequently.

A high-deductible plan requires that you shell out less money each month to maintain health coverage. However, you will pay more out-of-pocket for services if and when you need them.

That’s where a Health Savings Account (HSA) comes in.

Paired with a high-deductible plan, an HSA is an excellent way to set aside money tax-free to use for healthcare costs.

Some people love HSAs. They feel their money pays for services and medications they need rather than high premiums for benefits they rarely use.

The Pros:

  • Lower monthly costs for people who don’t use their health insurance very often
  • High-deductible plans tend to cover certain routine screenings and preventative care regardless of whether you’ve met your out-of-pocket requirement
  • A Health Savings Account allows you to set aside funds tax-free to use on healthcare expenses however you decide

Keep in Mind:

  • A deductible is what you’ll pay out-of-pocket before your plan starts covering healthcare expenses (so it’s wise to prepare if you opt for a high deductible).
  • While you can open an HSA on your own, you (and anyone else who shares your healthcare funds) need to enroll in a high-deductible plan first.

4. Ask About Joining Your Partner or Spouse’s Plan

Surprisingly, many people exploring COBRA alternatives due to job loss or transitioning into a gig-based career path overlook one of the most reasonable and affordable options:

Joining their partner or spouse’s plan.

If you’re currently in a domestic partnership with someone who has health insurance coverage through their employer, it’s worth looking into if, when, and how they could add you to their plan.

Do you and your partner take care of your finances separately?

Find out how much the monthly premium will increase and offer to pay the difference, as well as any copays or bills related to your healthcare.

A few questions you’ll want to ask the health insurance provider or benefits administrator include:

  • Which types of domestic partnerships are eligible for coverage under your partner’s plan?
  • Do my circumstances qualify for a special enrollment period, or do I need to wait for the open enrollment period?
  • With more than one person enrolled, does it make sense to choose a different plan from the employer’s options (like switching from an HMO to a PPO or opting for a lower monthly deductible)?

5. See if You’re Eligible for Medicaid

The Federal Government and individual states work in partnership to fund a public health insurance program called Medicaid.

This health coverage option is available to individuals (and their families) who qualify as low-income or are otherwise reliant on public services for access to health care.

Some Medicaid enrollees are exempt from most essential health care costs. If you are eligible for coverage, your state will determine whether you will owe a monthly premium or be responsible for copays, medication costs, or any portion of your health care bills.

Things to Know About Medicaid:

  • Medicaid is not available to everyone
  • States determine eligibility based on income, social circumstances, and specific types of need
  • Other, specialized public healthcare coverage is available for active military members, veterans, and people of Indigenous communities

Read More About Supplemental Health Benefits for Freelancers here.


What Are the Benefits of COBRA Alternatives?

The benefits of opting for one of the alternatives to COBRA may vary depending on the option you choose.

Generally speaking, you can expect to enjoy potential benefits such as:

  • More affordable option
  • The ability to choose a plan that best meets your health care needs
  • Better coverage (in some cases)
  • Flexibility to choose how much you spend on healthcare (and how you spend it)
  • Price and coverage comparisons between different insurance companies
  • The option to change your coverage during the open enrollment period
  • Both short-term plans and long-term options
Did you know that Gigly members save money on several vital health and wellness services? It’s true! Join us today to see how much we can save you.

How Do I Find the Right Health Insurance Option for Me?

Money in envelope

Ultimately, you are the only one who can determine which health insurance alternative to COBRA coverage is most beneficial to you.

But to make a responsible and informed decision, you’ll want to carefully consider all your options before you commit to a health insurance plan.

Here’s how you can do it:

  • Take time to consider what kind of health insurance coverage you need and how much you can afford
  • Make sure you understand all relevant terminology (copay, deductible, coinsurance, monthly premium)
  • Get no-obligation quotes and compare different rates using Healthcare.gov or a free, reputable rate comparison site
  • Don’t hesitate to contact a health insurance company directly if you have questions about plan details
  • Ask friends or family you respect for tips and advice
  • Don’t wait until the end of an enrollment period to make a decision or rush into selecting a plan
  • Account for potential enrollment website outages and delays during busy enrollment periods

Need Dental Insurance? We provide freelancers with a full guide to dental insurance.


How Does Gigly Help Members Handle Their Health Benefits?

You don’t have to navigate your healthcare coverage options alone:

Gigly is here to provide support as you make the transition away from a group health plan and find one that’s right for you.

We’ve joined forces with The Alliance of Gig Workers to offer incredible resources and benefits to our members.

Interested in how Gigly could help you as a contractor, freelancer, or entrepreneur?

Here are a few of our most popular healthcare-related perks you should check out:

  • Information and expertly curated resources
  • A member support team to help understand and navigate your options
  • Exclusive deals, discounts, and offers from our partners
  • Access to Teledoc visits and treatment for certain conditions, including mental health services

Conclusion

When there’s a change in how you get health insurance coverage, it can cause concern — particularly if you’ve been exploring COBRA as an option and see the price tag.

But don’t panic.

Fortunately, there are alternatives to COBRA that might not only save you money but also be a better fit for your health coverage needs long-term as a freelancer or contractor.

These tips are a great place to start. If you’d like more assistance, join Gigly today and enjoy our wide array of member benefits, support, and resources!