FAQ: When Should I Sign Up For COBRA, Part 1

One of the most often asked I get during COBRABusters workshops is if someone should wait until close to the 60 day deadline to make a decistion about COBRA coverage.

There are three important reasons why you shouldn’t delay.  Each reason is an opportunity cost. This post deals with the first and least costly reason and opportunity cost.

Technically, if your coverage expires on your termination date, you already have a gap in coverage from the next date forward, so you willat least have to fill this coverage gap by paying for COBRA retroactive to when your coverage ended, so that whenever you get new coverage in place you won’t have a gap in coverage, whether or not you decide upon COBRA or other coverage.

So even if there is health insurance that is less expensive than COBRA, the longer  you wait to to explore your options and complete an application, the longer you will have to purchase more expensive COBRA for that period, plus you should  figure on about  two to four weeks for your application to be approved.

Alternate coverage, if eligible, is usally about a third less expensive than COBRA.  Waiting until close to sixty days to explore alternatives and decide whether to elect COBRA means you’ve perhaps spent a third more for the sixty days since your termination, plus another thirty days while an application for alternate coverate is completed and approved.

As an example, if your family’s COBRA  premium is $1,500 per month, your opportunity cost is extra $500 vs. what you might be paying for alternate coverage.

Believe it or not, this represents the smallest opportunity cost and least important reason not to wait until close to 60 days to elect COBRA.  To learn about the other reasons why you shouldn’t delay, follow this link to the next post.