Cobra vs. ACA Exchanges: How to Find the Best Coverage When Unemployed

Up until recently, COBRA was the main provider for the newly-unemployed needing medical insurance—especially if they had a pre-existing condition.

But with the Affordable Care Act in full swing, individuals now have online insurance marketplaces to find coverage, which, according to experts, tend to offer more affordable options.

“The average monthly premium for individuals with COBRA is 40% higher and 56% higher for families compared to [plans] on the marketplaces,” says Michael Mahoney, senior vice president of consumer marketing at GoHealth. “It’s almost always cheaper.”

Currently, according to the eHealth Price Index, the average premium for an individual plan is $272 per month on the exchanges. The average employer premium for an individual is $490, according to the 2013 Kaiser Employer Benefits Survey.

The Consolidated Omnibus Budget Reconciliation Act, more commonly known as COBRA, provides continuation of group health coverage to the recently unemployed and their families for a limited amount of time-typically 18 months.

With COBRA, the former employee has to pay the entire premium plus an administration fee of up to 2%. People with pre-existing conditions can usually keep the same doctors and hospitals that they’ve been working with, but should expect to pay more than when they were employed since they no longer have an employer picking up part of the costs.

Under the ACA, insurers can’t deny coverage to people with pre-existing conditions, which has made finding coverage for these people more affordable. What’s more, Carrie McLean, director of customer care at eHealth.com, says the 10 essential health benefits that every policy has to include under the law makes individual plans more comparable to employer-sponsored coverage.

“Many people may prefer to stick with the health insurance plan they already know, and to maintain access to their preferred doctors,” says McLean. “Many people who have had insurance through their employer are not even familiar with individual health insurance and therefore are unaware of the rich options that exist in that market.”

According to Mahoney, people should take subsidies into account when weighing whether to pay for their existing insurance through COBRA or shop the exchanges. Subsidies are offered on plans on the exchanges for anyone making up to 400% of the federal poverty level. According to Kaiser Family Foundation, for an individual this tops out at around $45,000 per year, and for a family of four, this cuts off at around $94,000 per year.

While the monthly premium is an important factor to weigh picking a health plan—especially for the jobless—it shouldn’t be the only factor.

“If you have a pre-existing medical condition, finding a plan you can afford with the doctors, hospitals and treatment facilities in network is really critical,” says Richard Mann, senior vice president at Plansource, which helps employees review insurance plans. “Oftentimes, it’s not the easiest thing to determine.”

If you do decided to buy insurance on the individual market instead of going with COBRA, McLean recommends comparing the costs of the plan (premium, deductible and co-insurance), access to care and the quality of care.

For instance, if a currently-used doctor isn’t in network, make sure a plan offers other top-accredited doctors to choose from. Mahoney recommends identifying any potential specialized care (like having a baby) to make sure a plan offers coverage. After all, paying out of pocket for specialists will get expensive, but paying for services that are never is a money drainer.

“You’ll have to play a more active role, but you’ll have more choices,” says Mahoney. “If electing COBRA you are really just checking a box. When buying health insurance it forces you to consider your needs.”