COBRA Coverage

Basic information on COBRA:

• Consumer Guide to Continuation of Coverage [Nat'l Association of Health Underwriters]
• Frequently Asked Questions about COBRA [US Dept of Labor]

What is COBRA?

 

COBRA stands for “Consolidated Omnibus Budget Reconciliation Act of 1985.”  COBRA is designed to protect people from losing their health insurance when they change jobs or lose their job.  COBRA allows people to retain their group health insurance for a period of up to 18 months (individual) or 36 months (surviving dependents).

 

Who is eligible for COBRA?

 

All employers with 20 or more employees who offer a group health insurance plan must give all eligible former employees the option of continuing coverage at their own expense.  Former employees are eligible for COBRA as long as they participated in the group health insurance plan and did not lose their job due to “gross misconduct.”

 

Companies are required by federal law to notify qualified employees of their right to continuation coverage under COBRA through a “COBRA Qualifying Event Letter.”  The letter must let the employee know whether they are eligible for COBRA, which dependents are eligible, the cost of the benefit options and the time frame for electing coverage.

 

How much does COBRA cost?

 

The former employee must pay the full cost of the insurance premium.  The employer no longer contributes any portion of the premium expense.

 

What are the benefits of COBRA?

• COBRA allows you to retain your health insurance regardless of your health status.  You will not lose coverage due to poor health or a pre-existing condition.
• To reduce costs: (a) elect COBRA for family members with pre-existing conditions who are unable to qualify for an individual/family plan; and (b)  obtain individual/family plans for those members who qualify after being subject to medical underwriting.
• Electing and exhausting COBRA is one important factor in becoming “HIPAA Eligible,” which allows you to obtain an individual health insurance plan regardless of health status (see HIPAA).

What happens at the end of the coverage period (18 to 36 months)?

 

Within this time frame, one of several options may have occurred:

1. You may now have coverage for you and your dependents through a new employer;
2. You may have opted for individual/family health insurance; or,
3. You may have become “HIPAA-eligible” (see HIPAA), which allows you to obtain health insurance regardless of your health status (guaranteed issue).