Last minute COBRA

March 16, 2006 9:34 AM

Last minute COBRA coverage. A what-if scenario..

Let's say you're out of a job and are eligible for COBRA to continue your health insurance. As I understand it, the coverage is retroactive back until your original insurance ended. So if you wait, say, 3 months before signing up, you would have to "backpay" all three months.

So would the following be valid and legal:
Do not sign up for COBRA. Pay for doctor and/or medication out of pocket. If something really bad was to happen, where the bills amount to the thousands or tens of thousands of dollars, only then fill out the paperwork and pay for all the months in between, in order to have the recent "something really bad" event get covered.

Some other details/assumptions -
- There's a deadline to how long you can wait before signing on for COBRA. I think it's 2-3 months. So there's a fixed time-frame here.
- The assumption is that I'll be back in a new job with health benefits in 2-3 months time.
- The extent of my medical bills is about $15-30/month for an asthma inhaler, so it's hard to justify paying a hefty sum of money in order to effecitvely get a small discount on my inhaler.

You would think that COBRA and/or the insurance carriers would have safe-guards against people doing exactly what I describe. So does anybody have a good understanding of this and can explain to me why this may or may not be a really bad idea.

posted by jclovebrew to health (17 comments total)

"So would the following be valid and legal:
Do not sign up for CORBA. Pay for doctor and/or medication out of pocket. If something really bad was to happen, where the bills amount to the thousands or tens of thousands of dollars, only then fill out the paperwork and pay for all the months in between, in order to have the recent "something really bad" event get covered."

Yes.
posted by mr_crash_davis at 9:38 AM on March 16, 2006

I am going to be laid off in the next 2-3 months. I've had talks with my HR department about this exact subject. Your assumptions are correct based on what I've been told. There is a three month window from the time you leave your job, you can elect to pay for COBRA at any point during that window, and the coverage will be retroactive and cover any costs incurred during that time.

If I don't have a job, I plan to do exactly what you are thinking of doing. Especially since my severance package includes the cost of three months of COBRA which I may keep if I elect not to pay for the coverage.
posted by kimdog at 9:44 AM on March 16, 2006

From the link mr_crash_davis gave, it sounds like 60 days is the cutoff. Cool. So there is absolutely no reason to pay up right away. Glad I asked!
posted by jclovebrew at 9:47 AM on March 16, 2006

Just FYI, so when you're talking to your former employer about coverage you don't sound like you're talking about network programming:

CORBA = Common Object Request Broker Architecture

COBRA = Consolidated Omnibus Budget Reconciliation Act, which among other provisions allows workers to continue to purchase health insurance through a former employer's health plan for a period of time (also, a venomous snake native to regions of Asia and Africa)
posted by kindall at 9:49 AM on March 16, 2006

Whoops! Sorry, I seem to always do that. I did mean "COBRA" even though I wrote "CORBA". I have much more experience in the latter.

Is there any way an admin can correct my typo so someone searching later can find this thread?
posted by jclovebrew at 9:53 AM on March 16, 2006

I can think of one good reason to pay up front.

If you pay your COBRA charges starting on your last day of coverage, the insurance card from your former employer stays "live."

If anything bad happens to you, you've got a live insurance card in your pocket, and access to medical care, with more choices about the type of care that you may be eligible to receive than an uninsured person.

Now let's say you have *no* insurance coverage, but plan to file retroactively in the event of an emergency.

Something Bad happens to you. Your protestations to the contrary ("I've got COBRA to cover this... later!") you will be headed for the nearest emergency room as an uninsured person. Depending on the venue or jurisdiction you find yourself in, you may get excellent treatment there, or they may just stabilize you and then transport you to the nearest public hospital, which (again) depending on your jurisdiction, may or may not suck horribly.

Personally, I wouldn't be without an active insurance card in my wallet at all times, where I live (NYC.) Your mileage may vary.
posted by enrevanche at 9:53 AM on March 16, 2006

Be sure not to waive your COBRA coverage. Instead, tell them you want it but just wait 60 days to make the first payment.

Also, keep in mind that if you are seriously injured or come down with a major illness, you might not be in a position to pay for your COBRA coverage before the deadline elapses. I would give a check for the total amount of coverage to a trusted family member or friend with instructions to send it in if you find yourself in the hospital.
posted by kindall at 9:57 AM on March 16, 2006

Whenever I get laid off, I pay for COBRA. In the case of a 'live' vs. 'dead' insurance card, if you find yourself in the hospital, but in a position to talk to people, just tell the Billing department that you sent in the COBRA payment. There's always a gap between when you're employer's insurance ends, and your COBRA coverage begins, even if you send in the payment the first day you get the paperwork. If they bill insurance and it comes back unpaid, they merely submit it again, if they know that COBRA coverage is being acquired.

This should alleviate any concerns about being sent to a 'public' hospital for the uninsured if something bad happens. Because, technically, you are insured - it just hasn't kicked in yet.
posted by spinifex23 at 10:13 AM on March 16, 2006

Be sure not to waive your COBRA coverage. Instead, tell them you want it but just wait 60 days to make the first payment.

No, don't do this. Make sure they give you a COBRA notice and then don't do anything. If you accept the COBRA coverage right away, you only have 45 days to make the first payment, and should you fail to do so, that's the end of your eligibility. If you do nothing, you have 60 days to elect. Then, on the 60th day, you can elect, and you still have 45 days to pay the back premium.

If you follow the above advice, you're shortening your clock from 105 days down to 45 days.

Also note that the 60 day clock starts from when they give you the notice, not from your last day of employment (although those are often the same).
posted by MarkAnd at 10:27 AM on March 16, 2006

COBRA plan administrators will drop you from their rolls for any non-compliance on your part, however trivial. They generally make it impossible to pay premiums electronically, have strict payment deadlines, and will drop you immediately (and permanently) if you miss one by a day. It might not be so easy to make the 45-day deadline if you decide near the end of that period that you want to take the coverage.
posted by EiderDuck at 10:45 AM on March 16, 2006

Personally, I wouldn't be without an active insurance card in my wallet at all times, where I live (NYC.) Your mileage may vary.

For a service at a hospital or doctor's office, it is extremely unlikely that anyone will figure out that you've been terminated from your insurance plan until the bill has been submitted to the insurer for payment. By that point, you could certainly have already been reinstated to the plan.

Now, getting a prescription filled is another matter. Say you're in your COBRA election window and you get hit by a bus and suffer a broken arm. You get whisked to the emergency room, have your arm fixed, your insurance info taken, and a prescription for a painkiller written for you to fill at the local pharmacy. Sore and exhausted, you drag yourself to the pharmacy, hand them your prescription and insurance card and lo! "Sir, it appears that this coverage has been cancelled. Would you like to pay cash?" Yes, you would, and you should save your receipt because you can get reimbursed once your coverage gets reinstated.

This has been another episode of How the PBM Turns.
posted by MarkAnd at 10:48 AM on March 16, 2006

COBRA plan administrators will drop you from their rolls for any non-compliance on your part, however trivial. They generally make it impossible to pay premiums electronically, have strict payment deadlines, and will drop you immediately (and permanently) if you miss one by a day. It might not be so easy to make the 45-day deadline if you decide near the end of that period that you want to take the coverage.

Send everything certified and it doesn't much matter what COBRAServ or Ceridian or whoever does as long as you're within the window. Insurers have basically never won a COBRA lawsuit and everyone knows this.

I'm in the insurance industry, and while I'm not offering advice on what any individual should do, I would personally have no problem enrolling for COBRA coverage on the 59th day, and paying on the 44th. Unfortunately, my employer does not have to comply with COBRA regulations because we don't have 20 employees.
posted by MarkAnd at 10:55 AM on March 16, 2006

At my old job I had to notify them 60 days before my coverage was to end if I wanted to do COBRA. Because my job had a fixed end date, this was a feasible request.

But to answer your question, I don't think it's a good idea, EVER, to mess around with health insurance. I also tend to not trust insurance companies to keep their end of the bargain when it comes to retroactive coverage.
posted by elisabeth r at 11:31 AM on March 16, 2006

They generally make it impossible to pay premiums electronically, have strict payment deadlines, and will drop you immediately (and permanently) if you miss one by a day.


Also keep in mind that making some of this work right will have to do with how your (soon to be ex-) employer deals with it. I had a job where I got my "do you want COBRA?" letter before my last day of work. I *did* want COBRA so I said "yeah sure", paid for a month, and then I found out that I was eligible for lower cost state health care so I did nothing, figured all those threats about being dropped like a hot potato if I was a day late on a payment would be valid and notified them about five days into the month that I switched health care. My former place of work had already sent in my check for the next month (thinking they were doing me a favor, I guess) and then hassled me to repay them money that I technically didn't owe them. It all worked out in the end, but I busted my ass to make leaving my job be non-acrimonious and this screwed that up.

So, make sure that you are completely aware of not only what your understanding of the legalities of COBRA are, but also how your (soon to be former) workplace is going to deal with this so you have no nasty misunderstandings.
posted by jessamyn at 11:36 AM on March 16, 2006

Be aware that if you end up not taking the COBRA, you will have a gap in your insurance coverage. Now this gap, isn't a problem for new insurance-related expenses that come up, but depending on state law, it can be VERY important regarding pre-existing conditions.

Depending on your state laws, a gap in insurance can allow the new insurance company to not accept coverage for pre-existing conditions for many months (maybe even a year).

If there isn't a gap in insurance coverage, then pre-existing condition coverage may be immediate with your new insurance.

Check out the rules for your state with your insurance company, HR rep, and/or state insurance commission.
posted by ShooBoo at 12:04 PM on March 16, 2006

Also note that if you have a situation where you will get coverage for, say, 3 months as severence, your COBRA date is the date you stopped working, not the date your insurance coverage ended.

This is important because you have 3 months from your last day at work, not 3 months from your last day of coverage. This almost bit me in the butt. Luckily the HR dept caught this clause and let me know that I couldn't do the "wait and see if you need it" route.

In a previous job I did do the "wait until you need it" and at the end of three months I was not working, so paid the arrears and was brought up to full coverage going forward. Worked out fine.
posted by qwip at 3:27 PM on March 16, 2006

As some have said upthread, here is the optimal approach (and exactly what I did a few years ago):

1. Wait until you receive notice from employer to sign up for COBRA (this actually happened a couple of weeks after my last day at work in my case, because of some bureaucratic SNAFU). Let the clock start ticking.
2. Near end of clock, sign up for COBRA. Make no payments. Let second clock start ticking.
3. Wife has life-threatening emergency health condition, with bills totalling several tens of thousands of dollars.
4. Before second clock runs out, pay COBRA about a thousand bucks for coverage during the period in question.
5. Get new insurance.

Step 3 is optional.
posted by Rock Steady at 3:50 PM on March 16, 2006