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.
If your former employer had 20+ employees then you fall into Federal Cobra. If the company had 19 or fewer employees then you are subject to Cal-Cobra (the California version of Cobra).
In both Cal-Cobra and Federal Cobra you are allowed to sign up for Cobra anytime within 60 to 90 days of the time your company-benefit plan ends. The law says you have at least 60 days, and some employers allow 90 days (check with your company). You are not required to enroll.
If you wait 59 days and then decide you want (or need) to enroll in Cobra insurance, you are required to pay back premiums for the full 59 days (retroactive to the date your company coverage ended). Because of this, many people use “the ability to retroactively start Cobra” as a safety-net while they explore their other medical insurance options in California.
If you do enroll in Cobra (either Federal or Cal-Cobra), you will use your Qualifying Event and no longer be able to enroll in regular health insurance through the California exchange or directly with an insurance company. Many employer’s Human Resource departments fail to mention this fact.
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.
The important issues in the case were the following:
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.
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.
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.
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.
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.
If we wait until after March 1st to submit the application then the soonest the plans could start would be April 1st.
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.
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.
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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