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How Physicians, Graduating Residents, and Fellows Should Consider Using COBRA for Health Insurance Between Jobs

One of the biggest financial stressors physicians and graduating residents and fellows face when thinking about how much time to take off between jobs is how they will cover their health insurance needs. Not surprisingly, when residency graduation time comes around in the spring and summer, our physician communities are flooded with questions of what to do about health insurance once they are no longer covered by employer insurance. Depending on how long the doctor plans on taking off between jobs, they may need to buy health insurance on the marketplace. However, if the amount of time between the two jobs is 60 days or less, there is a savvy way to avoid paying for health insurance, provided that you qualify for COBRA coverage and that you and your dependents are healthy and don’t anticipate needing to use healthcare services. In this article, we discuss the benefits and strategy behind taking advantage of the option to retroactively elect COBRA coverage. 



Note: This article is part of our resources for graduating residents and fellows, as well as physicians looking for a change. We’ve compiled a list of other relevant resources below.


Disclaimer: Please do your own due diligence before making decisions based on this page. We are not formal financial, legal, or otherwise licensed professionals, and you should consult these as appropriate. To learn more, visit our disclaimers and disclosures.


6 highlighted facts about COBRA health insurance between jobs




What is COBRA and how does it help you to maintain your health insurance coverage between jobs?


COBRA (Consolidated Omnibus Reconciliation Act) allows you to continue health insurance coverage under the healthcare plan you had with your former employer. It is there to ensure a safety net for you and your family or other dependents that were under your health insurance plan. 


In order to be eligible for COBRA, you must have been enrolled in your employer’s healthcare plan and your employer had to have 20 or more full time employees.


Note that this doesn’t mean that your health insurance premiums will stay the same - just that you will still have access to the plan. In most cases, employers heavily subsidize your health insurance premiums, and under COBRA, you will now be responsible for that full insurance payment, so expect the premiums to be quite a bit more than what you were paying when the premiums were coming out of your paycheck. There may also be a small administrative charge that is levied on top of that premium by the plan. However, since you still have access to the negotiated premium discount that your employer likely had, it can still be much cheaper than buying health insurance on the marketplace


An important thing to note - while you normally can’t use a healthcare savings account (HSA) to pay for health insurance premiums, this is an exception - an HSA can be used to pay for COBRA. 


COBRA is not meant to be a long term solution. It’s meant to buy you time to get health insurance from your next employer or find another health plan that works better for your needs. Federal law says that you are allowed to keep the health insurance plan you secure through COBRA for up to 18 months. Note that this can be extended to 36 months if you have a second “qualifying event,” such as getting married, having a child, your spouse passes away, or you get a divorce. 



When do I need to sign up for COBRA if I want to use it for health insurance?


This is important for our next section on why this is a savvy way to potentially avoid paying for health insurance during a gap between jobs. You have 60 days to enroll in COBRA after a “qualifying event” such as losing health insurance, or the date your notice is mailed (whichever is the later date). Remember that a qualifying life event is not just losing your job or leaving your job, but also death or divorce from a spouse that you were getting health insurance through. Your employer from the job you are ending will typically send you details about how to sign up for COBRA.



How can I use this ability to retroactively enroll in COBRA to save money on health insurance in between jobs?


If the period where you are going to be uninsured is less than 60 days, this is a very powerful loophole for those who are healthy and don’t anticipate needing to use health insurance during those 2 months. In this situation, you can wait and see if you actually have an emergency that requires the use of health insurance, and/or weigh the costs of paying out of pocket during that time versus the cost of the premium. Many, many graduating residents and fellows or physicians in between jobs will choose this option of not having health insurance during this time, knowing that in a worst case scenario, they can enact COBRA to cover them retroactively from the date that their health insurance coverage lapsed. This is a great way to know that you will still have healthcare costs covered without having to pay premiums unless you actually need to use your health insurance.



What are some important caveats to know if I chose to employ this strategy of not having health insurance between jobs and falling back on retroactive COBRA if I need it?  


There are some very important caveats to know and investigate ahead of time:

  • First and foremost, ensure that you really will only be 60 days without health insurance coverage. While some employers start your health insurance on the first day you start your job, some others will have a different amount of time until your benefits kick in. It is not uncommon that a job won’t start your health insurance benefits until one or two pay periods or a month in. 

  • Know that if you have planned medical encounters during this time - for example, you or your spouse are pregnant, you or your dependents need to have a procedure during your time off, or you have ongoing chronic medical issues that require routine visits or medications, this is likely not a great option for you and you may want to elect COBRA from the get-go or shop around in the health insurance marketplace to see if there is a better option.

  • Know that if you do need to elect COBRA, you will pay for premiums not just starting when you use the health insurance, but retroactively to the day that your previous employer coverage ended.


What are my other options for health insurance during this time if COBRA is not a good option for me? 


As noted above, COBRA is not the best option for everyone, and there may be cheaper options available. Given how expensive health insurance can be, you should also explore your other options in this scenario. These include getting on the health insurance of your spouse (if applicable) or shopping for health insurance on the ACA marketplace. In the case of a job change, you don’t have to wait for open enrollment on healthcare.gov, as you have a qualifying event. In this case, you have up to 60 days to choose a plan, so the retroactive election of COBRA can be a good option in the intervening time there as well if needed.



Conclusion


Transitions between jobs are always a challenging time with lots of things to consider. Fortunately, health insurance coverage may be an easy one to check off if you can take advantage of the option to use the retroactive COBRA election. 



Additional resources for physicians transitioning between jobs


Checklist of things to do before giving notice and things to collect before leaving a job


Securing your life and disability insurance


Figuring out what to do with retirement accounts


Housing for physicians


Contract negotiations and Job Search


Personal Finance


Student Loan Refinancing


If you’re a graduating resident or fellow, make sure you watch the recordings of the transition to practice series events on our communities, which answer a lot of other FAQs we see during this time period. 


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