Daily Money Hack » Medical

COBRA Health Insurance Hack: Pay Only If Needed

DMH — Wed, 16 Jul 2008 10:11:13 +0000

If you recently left your job, either voluntarily or involuntarily, you probably received documentation related to COBRA health insurance. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 and requires that your employer extend health coverage to you for a period of time. Here’s a brief introduction to COBRA health insurance.

What’s the COBRA Health Insurance Hack? You have 60 days to decide whether you want COBRA health insurance or not and if you do, the coverage applies retroactively to when you left your job. This gives you a 60 day window to look for more insurance, compare costs, and ultimately decide what you want. This also gives you a 60 day time period of essentially “free” insurance. How is it free?

If you need insurance in that time, simply elect COBRA insurance and you’re covered. If you didn’t need it, don’t elect coverage until after the 60 days and you won’t have paid a penny. You basically only pay for insurance if you need it in that two month window!

That’s the COBRA health insurance hack.

Flexible Spending Account Loophole

DMH — Mon, 24 Mar 2008 13:31:32 +0000

Flexible Spending Accounts are a fantastic employer benefit that everyone should take advantage of. It allows you to save on medical expenses by taking payroll deductions and putting them into an account you can use on things like over-the-counter drugs, prescription drugs, co-pays, etc. (more about FSAs and other medical accounts) One great loophole with FSA’s is that you don’t need to pay back the overage if you leave your job mid-year.

For example, let’s say you opt to put $600 into your FSA for 2008. Each month in 2008, $50 will be deducted from your paycheck for funding your FSA. On January 1, 2008, you are able to spend the entirety of the $500, even though you haven’t been billed for anything. If you leave mid-year, you don’t owe anything if you spent your entire FSA. That’s right, so that means you can request $3,000 in your FSA, perhaps get some Lasik done, and then leave in June only having paid $1,500 pre-tax of the $3,000.

The reason this is possible is because any amount you fail to use in the year is forfeited, so the money balances out.