About COBRA as Self-Employed Health Insurance

by Chris Joseph

There are many great things about being self-employed. You get to be your own boss, pick and choose your assignments and pursue work that you are truly passionate about. Unfortunately, you may no longer have access to low-cost group health insurance through an employer. If you plan to leave your job to launch your dream career or have recently been laid off and want to start a business, one viable option is to continue your health insurance coverage under COBRA.


COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act, a federal law enacted in 1986 that gives people who work for companies with 20 or more employees the option to temporarily continue group health insurance coverage after leaving a job. You can extend coverage for up to 18 months in most circumstances, although you will now have to pay the entire premium on your own. You may qualify for COBRA if your employment ends for voluntary or involuntary reasons, unless you were terminated due to gross misconduct.


Entering the world of self-employment can be stressful enough without having to worry about finding health insurance. COBRA allows you to keep your health insurance intact without a lapse in coverage, giving you one less concern as you start your new venture. You'll also be able to keep the same doctors and coverage amounts if you wish. If you have any pre-existing health conditions, you won't have to face the possibility that a new insurer will decline you due to your health history, at least for the short term.


If you were used to paying 20 or 25 percent of your health insurance premium, having to bear the full cost yourself can be quite a heavy burden, especially when added to the other additional expenses you may incur when becoming self-employed. You might have to reduce or eliminate some coverages just to make the premium more manageable. The temporary nature of COBRA means that you will still have to find new coverage upon expiration. If a health issue crops up during your COBRA period, finding new insurance may be difficult when the time comes.


If you are in good health, you may want to explore alternatives to COBRA. Many health insurance companies offer individual plans that allow you to tailor the coverage to meet your specific needs and budget constraints. Depending on the type of business you're planning to start, there may be trade or professional associations you can join that offer relatively inexpensive group coverage. If you're married and your spouse has health coverage through his employer, it may be less expensive to be added to his group policy than continuing coverage under COBRA, and you won't have to worry about your insurance ending after 18 months.

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