When you leave a job that provides health benefits you become eligible for Cobra insurance. However, your employer may not fully describe how Cobra health insurance works, and what to be aware of. This happened to Laura England and her husband Steve in Oceanside California.
Summary of Client Situation
Laura and her husband had Cigna HSA health insurance through his employer-sponsored group plan. When Steve decided to leave his employer and start his own business, they knew it was time to begin looking for other options. Steve’s cost for the Cobra insurance was going to be over $800/mo.
Laura called SPF Insurance on Feb 23, 2016 to get some help finding new insurance plans. She explained that their coverage had ended on January 31st, and that her doctor had recently confirmed she was pregnant. Therefore she wanted to find out if there was better coverage for her pregnancy and delivery.
She said that both she and her husband were healthy, and rarely see a doctor except for yearly checkups. Since they lived in Oceanside California, Laura also wanted to make sure that the two nearest hospitals would be in-network for the birth of their baby.
Although Steve did not have a doctor, Laura wanted to continue seeing her Ob/Gyn at Scripps Coastal Medical Center in Encinitas California.
Finally, near the end of the initial discussion, Laura mentioned that her husband had enrolled them in Cobra coverage during his exit interview. He didn’t want any gaps in their coverage. His concerns were that they would be subject to a penalty if they didn’t have coverage. Plus they thought she might be pregnant so he wanted to make sure she had continuous medical insurance.
In summary, they wanted to get a great plan for her and basic coverage for him, while allowing her to continue seeing her existing doctors.
Key Issues We Must Address
The important issues in the case were the following:
- Could we get the Englands out of California Cobra?
- Would they qualify for subsidized coverage on Covered California?
- Which networks did the doctors and hospitals accept
- What is the best maternity insurance plan for her?
- When could the new plans start?
- Is there a lower cost plan than Cobra insurance
Here Are The Steps We Took To Create A Solution For David And Family
I knew before the first conversation was over that we had a big problem to address immediately. Without a resolution to the problem, we would not be able to help the Englands.
How To Get The Englands Out Of Cobra insurance?
As mentioned in the sidebar above, once you elect to start Cobra, you lose the qualifying event. The Cobra plan is a simple “continuation” of the group health coverage.
This means there is no “loss of minimum essential coverage due termination of employment status,” and therefore no Qualifying Life Event. The key here is if the Cobra stays in effect for any period of time, then the qualifying event is lost.
Therefore we told them to call the Cobra administrator and ask them to “cancel” the Cobra coverage back to it’s original start date of 2/1/16.
Could They Qualify For Subsidies On Covered California?
As it turned out, the reason Laura’s husband was leaving his job was because he was starting his own company. He had lined up several clients and was ready to run his company full time.
They estimated their Adjusted Gross Income (AGI) for 2016 to be around $80,000. The upper AGI subsidy limit for a couple in California is $63,720 so they wouldn’t qualify for a subsidy.
However, their baby would be born in late 2016, so their household size for their 2016 federal tax return would be three. The upper AGI limit for a family of three is $80,360. Therefore they would be borderline subsidy qualified.
After some discussion, Steve shared that he thought the $80k estimate was extremely conservative and that he expected it to be closer to $100k. Therefore the decision was made to not apply on Covered California and to enroll directly.
In What Networks Do Their Doctors And Hospitals Participate?
From experience, and having done network searches for thousands of doctors and hospitals, I already knew that Scripps physicians are in only 3 PPO networks in San Diego California. Blue Shield, Cigna, and Health Net PPO networks all have the Scripps physicians and hospitals in network.
|Doctor/Hospital||Blue Shield PPO||Cigna PPO||Health Net PPO|
|Ob/GYN at Scripps Coastal||Yes||Yes||Yes|
|Scripps Memorial Hospital Encinitas||Yes||Yes||Yes|
|Tri-City Medical Center||Yes||No||Yes|
The two hospitals nearest the Englands are Scripps Memorial Hospital in Encinitas, and Tri-City Hospital in Oceanside. These two hospitals are in the Blue Shield and Health Net PPO networks, but Tri-City is not in the Cigna network.
From this we know we need to choose medical plans from Blue Shield or Health Net.
What Are The Best Health Plans For Laura And Her Husband?
For Laura’s husband the decision was pretty straight-forward. He isn’t going to go to the doctor no matter what plan he gets, so a Bronze level plan will be fine for him.
Laura, however, will be going through the full 9 month prenatal preventive care, and delivering their baby in the November time-frame. The delivery will be a higher cost medical service. Typically this can cost $12,000 to $16,000 at hospitals in San Diego county.
Because of this cost we need a plan that will minimize her out-of-pocket cost when she delivers at the hospital. This typically means a Platinum plan.
At SPF Insurance we’ve analyzed all the maternity insurance plans that are available in California and list the best options in each region of California.
When we run a set of insurance quotes and look at the Blue Shield and Health Net PPO plans, it becomes immediately clear that Blue Shield’s Platinum 90 PPO will be the most cost-effective plan for Laura. The Bronze 60 PPO plan will be the better option for her husband.
The reason is that the similar plans from Health Net are noticeably higher cost.
When Could Coverage Start?
The loss of minimum essential coverage as a result of leaving a job gives some extra flexibility on when new plans can start. In Laura and Steve’s case, as long as we submit applications for their new policy before the end of February, we can get a March 1st start date.
If we wait until after March 1st to submit the application then the soonest the plans could start would be April 1st.
Which Plans Will Cost More?
Laura and Steve currently have a Cigna HSA 3000 Silver plan from his former employer. This plan will cost them just over $800 per month. The Cigna HSA has a $3,000 deductible and an additional $2,000 to reach the out-of-pocket maximum of $5000.
If they stayed the in California Cobra insurance, Laura’s delivery costs would be fairly high. When she went to the hospital to delivery their baby, she would have to meet the $3,000 deductible first. Then she would begin sharing costs with Cigna were she pays 30% of all additional expenses until she has paid $2,000 more.
With the Cigna HSA policy, if the delivery costs were $14,000, then Laura would pay $3,000, leaving $11,000. She would then pay 30% of the remaining $11,000, until she reached $2,000. In her case she would reach the $5,000 out-of-pocket maximum when the expenses went above $9,666.
In the Blue Shield Platinum 90 PPO plan Laura would have no deductible, and would immediate share costs with Blue Shield where Laura paid 10% and Blue Shield paid 90%. If the Hospital delivery costs were $14,000, then Laura would pay a total of $1,400 for the birth of their baby.
An out-of-pocket savings of $3,600.
With all the information collected at that point, I was ready to make my recommendations.
The Final Solution For The England Family
Fortunately Laura called SPF within the first month they had Cobra. The Cobra Administrator agreed to cancel the policy so that it was never in effect. If Laura had waited to call us until March 1st, we might not have been able to get the Cobra plan cancelled.
Now we could enroll in plans that were more suitable for what Laura and Steve needed. We did the application directly with Blue Shield, using the “Apply Now” buttons inside the quotes we provided to the Englands.
Laura signed up for the Platinum 90 PPO plan, and her husband enrolled in the Bronze 60 PPO plan. The combined cost of both Blue Shield plans was $795.50, so they saved a little bit each month compared to the $800+ Cigna Cobra insurance. The biggest difference is in the $3,600 in out-of-pocket savings by using the Platinum 90 plan versus the Cigna HSA plan.
We got a copy of the Cobra eligibility letter that was sent to the Englands, and included that as their proof of Qualifying Event. In both applications we requested a March 1st start date.
Blue Shield approved the application within a week and did give Laura and Steve a March 1st start date.
We also explained that the Englands would not be subject to a penalty. The Affordable Care Act allows you to be un-insured for up to 90 days during any year, without a penalty. So the 29 days the Englands went without a policy would not subject them to a penalty.
Lastly, we coached the Englands on how to get the baby enrolled shortly after birth in the November time frame.
Key Take-Aways From The Case Of Cobra Insurance California
- To decide if you should choose Cobra health insurance California residents need to consider the cost, the benefits, and any expected up-coming medical expenses.
- It’s possible to use Cobra as safety net protection against medical emergencies during the Cobra eligibility period without signing up for Cobra
- Most of the time when you leave an employer sponsored health plan, your coverage will terminate at the end of the month.
The exception is for California companies that “self insure.” These companies may terminate your coverage on your last day of work. Ask your employer when your coverage ends.
- Always check to see if there are better health plans than your Cobra health insurance.
- Special Enrollment Periods will allow you to sign up for new California health insurance plans within 60 days of your Qualifying Event.
If a medical emergency occurs before other health insurance begins, you can quickly signup for Cobra and retroactively pay the premiums back to the date your employer coverage ended.
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