How COBRA Works
Unemployment continues to rise, and as a result, thousands of individuals are finding themselves without a job and without employer-sponsored health insurance.
Recognizing the importance of health insurance and the need to provide a health insurance safety net, the U.S. Congress passed into law the Congressional Omnibus Budget Reconciliation Act of 1985, more commonly referred to as COBRA.
What is COBRA
COBRA is a federal law that provides workers who are suddenly without their employer-sponsored health insurance coverage to extend that same coverage for 18 to 36 months following the loss of their health insurance. Through COBRA, the former employee essentially assumes the premium that was previously covered by the employer.
While COBRA is a much-needed benefit for many individuals, this form of health insurance coverage can be expensive. However, the economic stimulus plan recently signed into law provides financial assistance to those who might be struggling to afford their COBRA premiums.
The plan includes a nine-month subsidy that will cover 65 percent of an individual's COBRA premiums for those who have been laid off. The subsidy is available to those who involuntarily lost their job between September 1, 2008 and December 31, 2009. In addition, individuals with adjusted gross income of $125,000 or more or married couples filing jointly with an adjusted gross income of $250,000 are not eligible for the subsidy.
Who is Eligible for COBRA
Former employees, retirees, spouses and dependent children are eligible to extend their health insurance coverage through COBRA. Qualifying events for COBRA coverage include:
- Employees:
- Voluntary or involuntary termination of employment for reasons other than gross misconduct
- Reduction in number of house of employment
- Spouses:
- Covered employee's voluntary or involuntary termination of employment for reasons other than gross misconduct
- Covered employee's reduction in number of house of employment
- Death of the covered employee
- Divorce or legal separation from the covered employee
- Covered employee becomes entitled to Medicare
- Dependent Children:
- Covered employee's voluntary or involuntary termination of employment for reasons other than gross misconduct
- Covered employee's reduction in number of house of employment
- Death of the covered employee
- Loss of dependent child status under the covered employee's health insurance plan rules
How Do You Elect COBRA Continuation of Coverage
By law an employer is required to notify health insurance plan administrators of a qualifying event within 30 days of an employee's death, termination of employment, entitlement to Medicare or reduction in work hours. In cases of divorce or separation, the qualified beneficiary has 60 days to notify the plan administrators.
Once the plan administrators have been notified of the qualifying event, they have 14 days to send an election notice to the plan participants and beneficiaries. Then, an individual has up to 60 days to determine whether or not to elect COBRA continuation of coverage.
Health Insurance Alternatives to COBRA
While COBRA is a great option for many individuals, such as those who are currently receiving treatment for a health condition, the often expensive plan is not necessarily right for everyone.
There are several options for those who find themselves without health insurance coverage. For some, short-term major medical insurance policies might make the most sense. These policies provide coverage for a defined period of time for major medical emergencies. This type of coverage might make more sense for individuals who foresee having employer-sponsored health insurance coverage in the near future through another job.
Another option is individual health insurance coverage, through which an individual purchases his or her own plan from an insurance company. There are many health insurance companies competing for your business, and as a result, one can often secure affordable health insurance.
Whatever you decide to do, you should evaluate all of your options carefully before you make your decision. You might be leaning toward COBRA but it wouldn't hinder you to obtain some quotes for individual health insurance plans for comparison. You might be surprised by what you find.
To assist you in your research, simply complete our online form. You'll receive several affordable health insurance quotes that you can compare.
