COBRA

COBRA is a federal law, which is short for the (Consolidated Omnibus Budget Reconciliation Act of 1985) allowing employees the ability to retain their health insurance coverage under their group plan when they leave their employment or are terminated for reasons other than gross misconduct.  The health insurance coverage would be the same as when they were employed and is offered for up to 18 months and in some cases, longer for spouses and dependent children depending on the circumstances.   

The COBRA law applies to employers who have 20 or more employees and provides a temporary extension of health coverage under certain circumstances.  Employees must have actually been with the health plan to be eligible for COBRA coverage.  Employees or former employees of private businesses and those sponsored by state and local governments, their spouses and dependent children could all be eligible for COBRA coverage, which is based on a qualifying event.

The qualifying events include, the employee is terminated from employment, the employee's hours have been reduced, the employee is entitled to Medicare, death of the employee, divorce or separation affecting the spouse or dependent children, or loss of dependent-child status. 

A list of Qualifying Events, the Qualified Beneficiaries and Periods of Coverage are explained in a table offered by the US Department of Labor.  For details, please visit http://www.dol.gov/dol/pwba/public/pubs/cobrafs.htm

COBRA Procedures and Notification Requirements

  • Employers must notify the plan administrator within 30 days of a qualifying event

  • A qualified beneficiary must notify the plan administrator of a qualifying event within 60 days

  • The plan administrator has 14 days to alert the employee and family members about their right to elect COBRA

  • Eligible family members have 60 days to decide whether to buy COBRA

  • After COBRA is elected, the first premium must be paid within 45 days, covering the time of retroactivity

  • COBRA allows a 30 day grace period after each due date of payment

  • The US Department of Labor has jurisdiction over COBRA regulations.  Employers that fail to comply with the notification rules could face fines by the Department of Labor.

COBRA Expense and Premium Payments

Once eligibility has been verified, the cost should also be taken into consideration.  Where previously your employer may have picked up most or all of the expense of the health plan premiums, now you will be responsible for paying the monthly premiums, plus an administrative fee of up to 2%.   The difference in payment could be substantial, and you would have to determine the importance of paying the extra amount to continue with your health insurance or going without. 

Of course, those individuals who require medical attention, visit a physician regularly, need monthly prescriptions, or have children, may consider paying the additional expense for COBRA coverage.  If you are concerned with possible pre-existing conditions in looking for individual coverage, you should also seriously consider purchasing COBRA.  Accepting COBRA does not mean you are responsible for paying 18 months of monthly premiums.  The 18 months is the maximum time allowed, but it can be used up to the point where other insurance becomes available or when it is no longer needed.