Quitting my job has turned out to be a great decision. Although I really enjoyed working for my last company, I was ready for a change and once we found out that my fiancee had gotten into med school in Irvine, we started planning for our move. Taking time off from work has allowed me to really focus on all of my online entrepreneurial activities and although I’m making a lot less than I was at my day job, I’m also working a lot less.
I’ve had a great couple months off so far but that will all change soon for the better since I got a job offer from one of the top aerospace companies the other day. Even though I’ll be back to working 9-5 in a couple months, I still have another month before I start and my total time off from work will end up being around 2-3 months. There was a lot of planning that went into this day job hiatus and I didn’t realize how much work it was to actually leave your job until now. I’ve already talked about the best day to quit your job, but one of the huge things that I almost forgot to consider was the cost of health insurance when you have no job.
I’m 26, so I’m just over Obamacare’s cutoff to be covered by my parent’s health plan unfortunately(otherwise this is the best option). And since I quit on a Tuesday and my company extends health insurance until the end of the pay period I got about 12 days of free health insurance. After that though, it was up to me to start paying the full cost of my health insurance.
COBRA is a law passed in 1985 that essentially gives employees the right to continue health insurance coverage once they separate from their employer. Often when you’re laid off, COBRA will be offered and paid for by the employer, but when you quit or you’re fired, it’s your responsibility to pay the full cost of insurance. I had an HSA/HDHP with my last company so I thought my monthly premium would be pretty low. I was shocked to find out that I would have to pay $366.90 to continue my coverage with Aetna under COBRA. When I was employed, I only had to pay $51 per month so that means that the company was covering $315.90 of my monthly plan. That is a complete rip-off for a high deductible plan!
Related Article: What’s the Best Day of the Week to Quit Your Job?
The interesting thing about COBRA though is that they give you 60 days to accept or reject your old insurance plan. So you can actually wait 60 days before making a decision on whether you want to keep COBRA or not. If you get into a serious accident during that time frame, you can instate COBRA(even after you’re injured) and you’re retro-actively covered although you have to pay for the prior 2 months of coverage. It’s probably cheaper though to just pay for any minor medical expenses incurred during the 60 day window out of pocket since paying anything under $733.80($366.90 x 2) will save you more than if you were to re-instate COBRA insurance. If you incur expenses over $733.80, then you would re-instate COBRA.
My Plan Going Forward
Since my date of termination(for medical coverage) was at the end of July I have until 10/7/13 to instate COBRA or not(I guess there is a 7 day grace period on top of the 2 months). I plan on waiting until the end of September and I’m going to purchase a HealthNet PPO plan through eHealthInsurance for only $94 a month(that plan is actually better than my old employer’s plan).
It’s only $40 for the first 2 visits to a primary care and specialist doctor, and the deductible is $3,500 with a max out of pocket of $6,500. My old plan made pay for everything, no co-pays or anything until I hit the deductible of $3,500. Obviously my company is doing something wrong if they have over a hundred thousand employees and they can’t negotiate a price better than 4x what I found in about 5 minutes of online searching.
If you go about this strategy, make sure that you don’t wait until the day your COBRA runs out(10/7 in my case) to sign up for health insurance through a different provider. There is sometimes a 1-2 week processing period so you want to be sure to sign up a couple weeks before and set your start date a couple days before your COBRA insurance expires.
I plan on starting my new job in mid-October so I really only need a few weeks of health insurance but I definitely want to be covered during those few weeks in-between my COBRA expiring and starting my new job. It seems like people always tend to get hurt/have accidents when they’re uninsured and at $50 for a couple weeks I think it’s a worthwhile investment.
Readers, have you ever signed up for COBRA insurance once you left a job? What do you think of my loophole? Good idea? Bad idea?
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-Harry @ PF Pro