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You leave your job and your employer offers you continuous coverage through COBRA. Unless you are about to start a new job offering no lapse in coverage when you switch from your old employer’s plan to your new plan, you’re going to need coverage the day your employer-sponsored coverage ends.
But there’s actually a very cool way to avoid paying for that new policy for 60 days, potentially saving you thousands of dollars in health insurance premiums. Here’s how:
So let’s say your job ends June 30 and you decide to opt into COBRA on August 20. That means you owe the premium – usually 102% of the full cost of your prior coverage, without any of your prior employer’s subsidy since you don’t work there anymore plus a 2% admin fee – for both July and August, even if you didn’t use your coverage in July. And let’s say that monthly premium is $1,000/mo.
But that means you’re not covered by health insurance in July and August, right? If something terrible happens, you’re going to have to pay for it out of pocket, right? NO!
The chances of something truly catastrophic happening during those 60 days are very slim (we’ve never heard of it happening, though that doesn’t mean it can’t), but if it does you’re retroactively covered and your medical bills will be paid under your former employer’s health insurance policy – guaranteed!
In the meantime, let’s say you get the sniffles and decide to go to urgent care to get it checked out, and you get a prescription for a generic antibiotic. You pay for the urgent care visit out of pocket to the tune of say, $150, and take the prescription to your neighborhood big box store and get the generic for $15. Total cost: $165. Savings compared to two months of COBRA coverage: $1,835! And you’ve still got COBRA in your back pocket just in case.
If this sounds too good to be true, it’s not. We talk to clients about this all the time and they often see the logic of this great money-saving strategy. Sometimes they choose not to do it, because they feel that having either COBRA coverage or an individual plan from Day 1 will give them the most peace of mind. It’s your choice. Rockridge Health Benefits is the Home of Peace of Mind Health Insurance™️, which means we’re not in the business of selling insurance, we’re in the business of making sure everyone we work with has peace of mind about their health insurance coverage.