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 next March.
- 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 next spring 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.
The COVID pandemic and the American Rescue Plan (ARP) have temporarily changed the rules regarding COBRA and individual health insurance. There are several points to keep in mind as a result:
- Through the end of September 2021, some COBRA and state-continuation enrollees can receive their coverage at no cost. The full subsidy for the monthly premiums is available if the person involuntarily lost their job or had their hours reduced. When the subsidy ends on September 30, 2021, enrollees will be granted a special enrollment period that will allow them to transition to the marketplace at that point if they choose to do so.
- For 2021 and 2022, health insurance premium subsidies are larger and more widely available for people who buy their own health coverage in the marketplace/exchange. Subsidies are particularly large for people who receive unemployment compensation at any point in 2021.
- There is a one-time COVID/ARP-related special enrollment period for people who want to enroll in health coverage through the marketplace or switch to a different marketplace plan. In most states, this window continues through August 15, 2021, and no qualifying event is necessary.
Normally, the rules are more stringent, and this will again be the case after the special rules in 2021 end:
- A person who is losing health coverage from an employer has 60 days to decide whether to elect COBRA, assuming it’s an option. They also have 60 days to enroll in a plan in the individual market. This is true even if they elect COBRA early in that window; they’ll still have a full 60 days — from when the employer-sponsored plan would have ended if they 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.)
- A person who elects COBRA can choose to cancel the coverage at any time. But unless that happens during the annual open enrollment period, they cannot then switch to an individual market plan unless they have a separate qualifying life event (such as getting married, having a baby, moving to a new area, etc.). If they become newly eligible for an employer’s plan, they’ll be able to switch to it at that point. But if they decline the employer’s coverage, keep COBRA coverage, and then choose to cancel COBRA, they would have to wait until the employer’s next annual open enrollment period to switch to the employer’s plan (just like individual market coverage, employer-sponsored coverage is only available during annual open enrollment periods and special enrollment periods triggered by qualifying life events).
- When the COBRA coverage is exhausted (usually after 18 months), the person will qualify for a special enrollment period to switch to an individual market health plan. The qualifying event would be involuntary loss of coverage.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.