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The Little-Known Obamacare Catch-22

You can get caught if you lose your job and want COBRA health insurance

By Donna Ballman and AOL Jobs

(This article appeared previously on AOLJobs.com.)

When I'm negotiating severance packages for employees, many times employers will offer to pay a month or more of COBRA payments.

COBRA is the law that says employers have to let employees who lose their jobs stay on the company's insurance for up to 18 months as long as the employee pays 100 percent of the premium. Those premiums can be huge: $1,000 or more sometimes. Getting the employer to pick up some of the premiums can be a huge benefit.

 

Until now, that is. 

How COBRA Works

 

The way that COBRA works is that your employer cuts your insurance off when you leave, then you get COBRA paperwork about 45 days later. When you elect COBRA and your employer or you pays the premium, you'll get coverage retroactively.

(MORE: Health Insurance for the Self-Employed)

 

Under the Affordable Care Act, commonly known as Obamacare, there was an open enrollment period that just expired on March 31, 2014. Before the end of open enrollment, I was telling people to elect COBRA and then start applying for the exchanges so there was no gap. The exchanges are absolutely going to be cheaper than your COBRA. Obamacare is a lifesaver, literally, for unemployed people who can't afford COBRA.

 

The next open enrollment isn't until November. Unless you qualify for the special enrollment period due to a change of circumstances, you have to wait until the next open enrollment to get covered by the exchanges.

 

You qualify for special enrollment if you lose your job, or if your COBRA ends after open enrollment. Here's the kicker:

 

If you were on COBRA for even a month, you don't qualify for the special enrollment period until your COBRA period ends. You have to wait until the next open enrollment in November.

Loss of employment is a special circumstance that gets you into the special enrollment period, but failing to pay COBRA doesn't. You can choose between COBRA and Obamacare at the end of your employment, but you're stuck with your choice.

To add to the confusion, I called the hotline for the exchanges, and they told me that if you even qualify for COBRA you don't qualify for the special enrollment, which is wrong according to the website, but it's an added problem that people will have to deal with. The Obamacare website says this:

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Yes, leaving your job and losing eligibility for job-based health coverage will trigger a special enrollment opportunity that lasts for 60 days. You can apply for Marketplace health plans and (depending on your income) for premium tax credits and cost sharing reductions during that period. If you enroll in COBRA coverage through your former employer, however, you will need to wait to the next Marketplace open enrollment period if you want to switch to a Marketplace plan.

 

 

 

This gap is, literally, a matter of life and death.

 

Donna Ballman is a author, employment lawyer and AOL Jobs contributor. Her books include Stand Up For Yourself Without Getting Fired: Resolve Workplace Crises Before You Quit, Get Axed or Sue the Bastards and The Writer’s Guide to the Courtroom: Let’s Quill All the Lawyers. She also writes the award-winning blog on employee-side, employment law issues, Screw You Guys, I’m Going Home.

Donna Ballman is an employment lawyer in Ft. Lauderdale, Fla. and the author of Stand Up For Yourself Without Getting Fired. She has written for AOL Jobs and Monster.com. Follow her on Twitter @EmployeeAtty. Read More
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