Q. After I lost my job, I went on COBRA, which lets me keep my former employer’s insurance for 18 months. It is good insurance, but more than I can afford, since I have to pay the entire premium. My COBRA runs out in May.
- Can I buy insurance in the exchange that starts January 1 and stop paying for my COBRA insurance at that point?
- Would I be eligible for a tax credit to help cover the premium?
- Finally, what if I want to wait and see how things work out and wait until the summer to switch?
A. Yes, you can buy insurance in the exchange during open enrollment and drop your COBRA insurance. Once you’re enrolled in a plan for January, you can cancel your COBRA coverage. Whether you are eligible for a tax credit will depend on your household income.
But anyone who wants to replace COBRA coverage with individual market coverage needs to pay attention to the open enrollment period for individual health insurance. If a person on COBRA doesn’t purchase a new plan during open enrollment, he would be stuck with COBRA either until the following year, or until he experiences a qualifying event that triggers a special enrollment period.
There was a one-time SEP in 2014 for people on COBRA, giving them the option to switch to an individual market plan instead, outside of open enrollment. That is no longer available though; COBRA enrollees must have a regular qualifying event in order to switch to an individual market plan outside of open enrollment.
(There is one minor exception to this rule: If you sign up for COBRA when you’re first eligible, you still have a full 60 days — from when your employer-sponsored plan would have ended if you hadn’t taken the COBRA offer — to switch to a plan in the individual market instead. This is a change that was implemented by HHS in late 2016. Before that, the election of COBRA ended a person’s special enrollment period for individual market coverage.)
The good news is that the expiration of COBRA is a qualifying event that allows a person to go to the exchange (or off-exchange) to buy a policy regardless of when it occurs during the year. So if you decide to keep your COBRA plan until it runs out in May, you’ll be able to switch to a new plan at that point.