COBRA
What is COBRA?
COBRA is a federal law that allows laid-off workers to continue to purchase the health coverage from their employer-sponsored plans for a defined period (typically 18 to 36 months) after they leave their employers. It does provide continued coverage through your previous employer’s group plan, although you are fully responsible to pay for the cost of the insurance. Basically, COBRA allows individuals who lose their job (or benefits in some cases) the option to keep their group health insurance.
The advantage is that individuals and their families have the option to remain on the same plan It allows them to retain their health benefits during the period of time the individual needs to find a job that provides benefits or to find a suitable alternative coverage. The disadvantage is that COBRA premiums can be very expensive. Some individuals may not be able to afford coverage with out a job.
Not everyone is eligible for COBRA. The following individuals are not eligible for continued coverage under the COBRA program:
- federal employees
- church employees
- employees covered in groups fewer than 20 people
- people who are eligible for any other group health plan, including Medicare
How Long Does COBRA Coverage Last?
The period of time you can keep COBRA coverage depends on your qualifying event. A qualifying event is termination of employment or a reduction in work hours that causes you to lose your health benefits.
- If your major medical coverage ends because your employment ends (other than for gross misconduct), or because your hours are reduced, you and your qualified dependents are allowed to keep coverage under the employer’s health insurance for up to 18 months by paying for the full cost of their coverage.
- Under the Health Insurance Portability and Accountability Act of 1996, certain people with a disability are allowed to qualify for 29 months (the original 18 months plus an 11-month extension) of COBRA continuation coverage.
- dependents who lose job-based coverage due to a change in the family (such as divorce or other qualifying event) can still get COBRA coverage for up to 36 months.
How much does COBRA Cost?
The cost of the premium for COBRA coverage is equal to the full cost of your group health coverage. This includes both the employer and employee share plus, up to 2% more for administrative costs. Generally, this is much more more than you were paying as an employee of the company. The reason is your employer most likely paid for part of the premium. Some employers may give the option of dropping out of “non-traditional” insurance plans, such as dental and vision coverage, in order to reduce costs.
What happens when my COBRA coverage runs out?
A conversion privilege usually kicks in when your COBRA coverage runs out. A conversion privilege allows an individual to switch to a non-group plan without any interruption of coverage. The COBRA conversion process also allows individuals to bypass the requirement for a physicial exam in order to qualify for coverage. Most insurance companies offer a conversion opportunity.
Converting COBRA to a non-group plan is not always the best choice. Insurance companies are not obligated to provide the same benefits you enjoyed with your employer’s health plan. Typically, individuals find that conversion plans offer fewer benefits at a higher price thant the group plans they want to replace. This is due to the fact that most individuals admitted into such coverage are pooled with individuals who are considered to be in poor health.
Are there other health insurance options instead of COBRA?
One possible option is for individuals who become unemployed is to purchase interim health insurance. Sometimes called Short Term Health Insurance, interim insurance is designed to help an individual with coverage during a brief gap in coverage. Individuals can purchase interim insurance coverage for periods of 1 to 12 months. A number of insurance companies offer interim health insurance for people who are between jobs and need temporary healthcare.
