COBRA Continuation Coverage

COBRA (Consolidated Omnibus Budget Reconciliation Act) is designed to help you keep group health coverage after certain types of events, such as losing your job.  When you become eligible for COBRA benefits, your employer is required to tell you.

The upside is that your benefits remain the same as they were before you got caned (if you want, ynou can even choose to continue separate coverage options like dental and vision.)  The downside is that you bear the entire burden for paying up to 102 percent of the plan’s cost.  If your employer used to pay your premiums, this can be a shocking amount of cash to lay out every month.

According to the National Coalition on Health Care, only 7 percent of the unemployed can afford COBRA. The average family plan averages $700 per month, with individual plans costing $250 per month.

Eligibility
The guidelines for COBRA eligibility are set by the Federal Government. You qualify if:

  • You worked for a company that employed at least 20 people (for smaller companies, see “Mini-COBRA” below) AND
  • You voluntarily left the company OR
  • You lost your job for any reason other than gross misconduct OR
  • Your hours were cut so much that you were no longer eligible for health coverage

Your spouse and dependent children are also entitled to coverage. In addition to the above guidelines, they can apply in the following instances:

  • Death of a qualified parent or spouse
  • Divorce or separation from a qualified spouse
  • When a dependent child loses dependent status

Choosing COBRA

When you get canned, your employer will notify you about your rights to COBRA coverage.  You then have 60 days to decide whether or not you want it.  However, coverage begins on the first day that you would have otherwise lost health insurance regardless of when you opt in.  For example: if you wait 50 days to opt in, you still have to pay premiums for the prior 50 days and your coverage begins retroactively.Each plan administrator has different rules for applying and paying for COBRA. You should get instructions when you lose your job.  If not, contact your plan administrator immediately.NOTE: in the event of divorce/separation or loss of dependent status, you must notify the plan administrator yourself.  In all other instances, your employers is legally required to notify you.

How Long Does It Last?
COBRA typically lasts 18 months, although the plan administrator can elect to extend the coverage period.  In the event of death, disability, divorce, or loss of dependent status, coverage is usually capped at 36 months.

Within these maximum coverage limits, coverage can also stop if:

  • You do not pay your premiums on time
  • Your former employer stops offering insurance to its employees or goes out of business
  • You qualify for another group health plan, as long as it does not have limitations when it comes to existing conditions

Mini-COBRA
Although the coverage periods are often less than with the Federal COBRA, 40 states have extended continuing coverage rights to employees of small firms through so-called “mini-COBRA” plans.  These plans are administered by the states themselves.  For a list of participating states, click here.

COBRA and Fiscal Stimulus
As you may have heard, you may be eligible for a 65% government subsidy of your COBRA premiums. To learn more about this program, read these two articles on The Layoff Beard Blog: Cobra Subsidy in Stimulus Package and More Details on Subsidized COBRA.