Cobra Question

[NoOneGetsIt]

Hi
I recently left my job and have Cobra available.
Per the Cobra rules, I have 3 months to sign up for it [retroactively] so am covered but I don't HAVE to sign up for it. Can I sign up for ACA after that and be OK or is the IRS gunna come after me for a lapse in coverage
Thanks
CV

 

[GalaxyBoy]

This article might help. It says, "Under the ACA, you can go up to three months in a row and not have to pay a penalty on your federal income taxes for being uninsured."

Job change and Obamacare: How to deal with a health insurance gap

If you do elect COBRA, my understanding is that you would have to wait until open enrollment to switch to a marketplace plan. [edit: unless COBRA runs out.]

As important as the answer to this question is, I strongly recommend independently verifying this information. I'm not a lawyer or an expert by any means.

 

[Philliefan33]

We just covered ACA in my tax prep course. For 2016, you do not have to pay a penalty for being uninsured for less than three consecutive months. Assuming that part of the rule didn't change for 2017, you could wait 2+ months to sign up for ACA. Just make sure you get it done before 3 months.

I think the actual timing for COBRA coverage is 60 days to elect to take it, then 45 days to pay for it. When my DD changed jobs this year, she went 30 days without having health insurance but if something bad had happened in that 30 days she could have retroactively signed up for COBRA to pay the bills.

 

[broadway]

Hi
I recently left my job and have Cobra available.
Per the Cobra rules, I have 3 months to sign up for it [retroactively] so am covered but I don't HAVE to sign up for it. Can I sign up for ACA after that and be OK or is the IRS gunna come after me for a lapse in coverage
Thanks
CV

Are you trying to avoid paying for 3 months of coverage?

Personally, I would either sign up with ACA and be done with it, or stick with COBRA and be done with it.

If something should happen in those 3 months, you will need to fork over $$$ first and then have insurance reimburse you.

 

[Huston55]

This article might help. It says, "Under the ACA, you can go up to three months in a row and not have to pay a penalty on your federal income taxes for being uninsured."

Job change and Obamacare: How to deal with a health insurance gap

If you do elect COBRA, my understanding is that you would have to wait until open enrollment or a qualifying event to switch to a marketplace plan. [edit: unless COBRA runs out.]

As important as the answer to this question is, I strongly recommend independently verifying this information. I'm not a lawyer or an expert by any means.

After FIRE, I used COBRA for ~1 yr until I qualified for another plan (TriCare). I switched to TriCare upon qualifying, which was when I turned 60yo (versus open enrollment).

So, I'd edit the above to include "or a qualifying event."

 

[gauss]

This article might help. It says, "Under the ACA, you can go up to three months in a row and not have to pay a penalty on your federal income taxes for being uninsured."

Job change and Obamacare: How to deal with a health insurance gap

If you do elect COBRA, my understanding is that you would have to wait until open enrollment to switch to a marketplace plan. [edit: unless COBRA runs out.]

As important as the answer to this question is, I strongly recommend independently verifying this information. I'm not a lawyer or an expert by any means.

As far as avoiding the penalty (aka SRP) under ACA:

• 1 day of coverage in a month counts as having coverage for the entire month
• you can have up to a 2-month "short-coverage gap" and avoid the penalty. If you have 3 full months back to back with no coverage then you would owe a penalty for all 3 months
• you can only have one "short-coverage gap" per calendar year
• the gap looks back into the prior year (ie if Dec Jan Feb you had no insurance nor another exemption, then you would pay the penalty for those three months)

IRS Form 8965 and the associated instructions spells this out.

-gauss

 

[NoOneGetsIt]

Thank you for all the info...one last thing

So my understanding is that if I do Cobra I can't switch to an aCA plan until the end of the year is that correct?

man...retiring is a lot of work!

 

[gauss]

I would need to research the interaction of Cobra and ACA, but that may indeed be the case.

If your MAGI is less than 400% of the Federal Poverty Level, I believe that you can qualify for Premium Tax Credits (PTC) ie - subsidies despite having Cobra available.

Have you cost compared an ACA Marketplace plan vs the Cobra plan? (both gross ACA cost vs net cost with a PTC subsidy if you qualify).

Have you checked if the end of your employer coverage is a qualifying event to purchase an ACA plan outside the normal annual enrollment window?

If yes - Have you checked how long, once your employer coverage ends, do you have to enroll in an ACA plan without waiting to the next annual enrollment window?

That is the approach I would take but beware that 60 days may be the upper limit to get this all in place (going from vague memory).

-gauss

 

[growing_older]

The ACA penalty is not the only thing to be concerned about. It's possible to have a sudden onset illness or accident that renders you incapable of making insurance purchasing decisions (a coma for example). Also, while you may avoid the penalty, depending on rule changes, some pre-existing conditions may soon be subject to a "continuous coverage" rule, which would only protect you if you did maintain continuous coverage.

 

[MBSC]

Also, while you may avoid the penalty, depending on rule changes, some pre-existing conditions may soon be subject to a "continuous coverage" rule, which would only protect you if you did maintain continuous coverage.

A gap of no more than 63 days is considered continuous coverage under current law for employer plans. The potential rule changes referred to apply this rule to individual plans.

The Health Insurance Portability and Accountability Act (HIPAA) of 1997:

As long as you have maintained continuous coverage without a break of more than 63 days, your prior health insurance coverage will be credited toward the preexisting condition exclusion period.

Reference: https://archive.ahrq.gov/consumer/insuranceqa/insuranceqa10.htm