Is COBRA the Right Fit for Small Business Owners?

By Brandon Cruz

If you’re transitioning from a full-time employee to a full-time business owner, your health insurance might not be at the forefront of your concerns – but it’s something you can’t afford to neglect. While it might seem easy to stick with your former employer’s insurance plan, it may not be the most cost-effective choice.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to keep your employer-sponsored health insurance for up to 18 months after you leave your job. However, the Affordable Care Act provides even more options for health coverage. So, when should you consider COBRA, and when is it better to explore other options? Let’s dive into COBRA and some common alternatives to decide what’s best for you and your family.

Opting for COBRA through your previous employer lets you retain your current coverage without any limitations or waiting periods. But COBRA is only temporary, lasting up to 18 months, and can be quite expensive. It doesn’t offer customization, meaning you might not get the best value compared to other health insurance options.

Individual health insurance gives you the flexibility to choose a plan that suits your health needs, lifestyle, and budget. Unlike employer-sponsored plans, individual plans are linked to a person or family, not a job – making them a good option for entrepreneurs. These plans can be more affordable than COBRA because you might qualify for federal tax subsidies to reduce monthly premiums. These subsidies are available for individual plans purchased from the marketplace to those earning between 100% and 400% of the Federal Poverty Level.

Another alternative to COBRA is joining your spouse’s health insurance plan. If you’ve just left your job and lost your health coverage, you might qualify for a Special Enrollment Period. This lets you join your spouse’s employer-sponsored plan and add your children too. You need to act quickly, though: you have to enroll within 60 days of losing your previous coverage. Otherwise, you could be without insurance until the next Open Enrollment Period.