Everything You Need to Know About COBRA Insurance

Thanks to the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), you don’t have to lose the health insurance that was provided by your former employer. But you’ll have to pay full price as well as an up-to-two percent administration fee.

COBRA health insurance provides for the continuation of group health coverage when you quit, retire or are fired from a job that offered a qualifying plan. It can also be applied if your hours are reduced so that you no longer meet your employer’s criteria for plan eligibility. The only exception is dismissal for gross misconduct.

Who Qualifies for COBRA Coverage?

To qualify for COBRA you must have lost your employer-provided insurance because:

• You were fired (unless you were terminated due to “gross misconduct.”)
• You quit your job.
• You no longer qualify for employer-sponsored coverage because your hours were reduced.

Dependents can also use COBRA if they lose eligibility due to:

• A child dependent turns 26 and is no longer eligible for covered on a parent’s plan.
• The covered employee died.
• The covered spouse divorces or legally separates.
• The covered employee becomes eligible for Medicare.

What are the Rules for COBRA Coverage?

The COBRA legislation only applies to private sector and state and local governments with a minimum of 20 employees, although some states also have abbreviated versions of COBRA insurance for employees from companies with fewer than 20.

COBRA coverage can last for up to 18 months, and sometimes up to three years if the reasons for loss of employment-based coverage are different than the standard criteria of loss of job or hours. You can cancel COBRA coverage at any time.

Once an employer notifies COBRA that you no longer qualify for employer-provided insurance (within 30 days of the event), you have roughly 60 days to notify COBRA if your eligibility is due to divorce, legal separation or a dependent child has reached the age of 26.

If you decide to exercise your COBRA rights, you have 60 days from the triggering event to apply. Be aware that you will be picking up the entire tab. While the group rate is generally more advantageous than
individual health insurance rates, plan to experience sticker shock.  But even with the big price tag, there are definite benefits to maintaining continuous coverage until you can find another job, especially if you’re older or have health issues.

Under COBRA, you must be offered the same coverage you had immediately before you qualified for COBRA continuation coverage. Any change to the group plan for active employees will also apply to you, and you must be allowed to make the same choices they may be given, such as plan options offered during open enrollment. COBRA also caps the premium you can be charged. Currently, it can’t exceed 102 percent of cost of the plan, including what’s paid by employees and the employer, plus 2 percent for admin costs.

What Is An Alternative to COBRA?

If you don’t want COBRA insurance, you can take a different path to health coverage.

• Buy a plan through an agent or broker.
• Get Affordable Care Act coverage, with supplemental assistance if you qualify.
• Buy a short-term policy.
• Wait until you get another job that offers insurance.
• Do some research and find a policy that fits your needs and budget online.

EINSURANCE offers a quick and easy way to compare policiesfrom different insurance providers.