Short-Term Coverage: A Good Alternative to COBRA?

If you’ve offered COBRA continuation coverage to former employees or their spouses, you know it can be an expensive option for them. Fortunately, short-term coverage can be an affordable alternative.

COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act of 1985, is a federal law that guarantees employees who lose health coverage due to certain life events an opportunity to temporarily continue that coverage. Qualifying events include retirement, termination of employment (other than by reason of gross misconduct), reduction in hours, death or entitlement to Medicare benefits, divorce or legal separation from the covered employee and loss of dependent child status.

The Challenge
Since the employer is no longer contributing toward the cost of coverage, not all employees can afford this option. A 2016 Kaiser Family Foundation analysis indicates that employers pay almost 82% of the cost of their employees’ health insurance and nearly 70% of the total family premium. For instance, if an employee is used to paying $250 per month for coverage, and the employer pays $400, the former employee would have to pay $650 per month to continue health plan coverage with COBRA.

While insureds can qualify for special enrollment on the federal marketplace through healthcare.gov, those who aren’t eligible for federal subsidies on the marketplace, or can’t afford typical individual major medical plans, may find these options unaffordable, too.

The Solution
Short-term health insurance plans are designed to provide great short-term coverage for unexpected illnesses and accidents. Short-term coverage can last up to 364 days and can be renewed up to 36 months depending on the state. Individuals choose a deductible and plan benefits that fit their and their family’s needs. Benefits include office visit copays and prescription drug options at a price much lower than COBRA plans.

According to eHealth, an online marketplace, the average monthly premium for a three-month short-term plan was just $107 in 2018.
To learn more affordable health plans for your insureds who are eligible for COBRA, click here.

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Allied National

Founded in 1970, Allied National is one of the nation's oldest and most experienced third-party administrators. We're the small group benefit experts working to provide unique and affordable group health benefits to small business employers.