When an employee leaves their job or has their work hours reduced, the Consolidated Omnibus Budget Reconciliation Act (COBRA), a health insurance program, permits eligible employees and their families to continue receiving the benefits of health insurance coverage. The fundamentals of COBRA, including its operation, eligibility requirements, advantages and disadvantages, and other characteristics, are covered below.
What is COBRA Insurance ?
A federal legislation known as COBRA (Consolidated Omnibus Budget Reconciliation Act) enables you to maintain your employee health plan even if you've left your previous company. It enables people to continue their health plan for a short period of time in certain situations, including as job loss, a reduction in hours worked, a death, or other life events. However, not everyone qualifies for these perks.
A portion of the insurance premiums must be paid by large businesses in the US who employ 20 or more full-time workers in order to offer health insurance to their qualified employees. The company may stop covering its portion of the employee's insurance payments if the employee no longer qualifies for the employer's health insurance benefits, which can occur for a number of reasons (such as being fired or working fewer than the required number of hours per week). In that situation, COBRA enables an employee and their dependents to continue with the same insurance coverage for a short time as long as they are prepared to pay for it independently.
Former coworkers, spouses, ex-spouses, and dependent children must be given the choice to continue their group health insurance coverage under COBRA, which would otherwise be cancelled. COBRA health insurance may be less expensive than an individual insurance plan, despite the fact that these people will likely pay more for it than they did while they were workers.
It's crucial to remember that COBRA is a health insurance program, and certain plans may pay for expenses like prescription medication, dental work, and vision care. It excludes disability insurance as well as life insurance. In accordance with the American Rescue Plan Act of 2021, from April 1 through September 30, 2021, the federal government reimbursed COBRA insurance premiums for people (and their covered relatives) who lost their jobs as a result of the 2020 economic crisis.
How Does the COBRA Insurance Work ?
The Consolidated Omnibus Budget Reconciliation Act is referred to as "COBRA." Since 1986, after qualifying events, private insurers for employer-sponsored group health plans have been obligated to maintain job-based health coverage under the Act, a federal law. These occurrences include losing coverage as a result of a divorce or as a dependent following the death of the primary beneficiary, as well as being laid off or dismissed, save for "severe misbehavior." The reduction of your work hours is one of them.
When an employer's health plan expires, COBRA insurance extends your coverage:
- You can get information on COBRA coverage from your employer, your insurance provider, or both. When you first enroll, your insurance provider must include information about COBRA rights in your plan documentation.
- You have up to 60 days to decide if you want to keep your COBRA health insurance. If you don't choose it, your health insurance will expire on the same day that the coverage under your employer's plan expires.
- Your COBRA continuation coverage will begin the day after your employer's plan coverage expires if you choose to do so. It will provide the exact same advantages that you received from your employer's group plan. You can keep seeing the same doctors and other providers and adhering to all the terms of the current plan.
- The length of COBRA coverage might be either 18 or 36 months. Depending on the kind of qualifying event that qualified you for COBRA
- If you don't pay your premiums or other associated costs for coverage, COBRA may be cancelled early. If you land a job that provides health insurance before it expires, it can also be cancelled.
- Get sure you study the fine print of your COBRA insurance policy to make the most of it. Contact your insurance provider if you have any inquiries.
Key Facts of COBRA Insurance
- The Consolidated Omnibus Budget Reconciliation Act, or COBRA, gives qualified workers and their dependents the choice of continuing health insurance coverage when a worker leaves their job or has their work hours reduced.
- Normally, COBRA coverage must be made available to employers who have 20 or more full-time equivalent workers.
- Depending on the circumstances, COBRA's health insurance coverage is only available for a limited time of 18 or 36 months.
- Due to the fact that the newly unemployed person is responsible for covering the entire cost of the insurance, COBRA coverage is typically expensive.
- During the 2020 economic crisis, if you lost your health insurance due to a job loss, you are eligible for a "special enrollment" period on the federal exchange, giving you 60 days to enroll. This could be a strategy to discover a COBRA substitute that is more affordable.
- For those who meet the requirements, the American Rescue Plan Act (ARPA) of 2021 offers 100% COBRA premium coverage from April 1, 2021, through September 30, 2021.
- After leaving your employment, COBRA offers a viable option for continuing your employer-sponsored health coverage for a period. However, the price may be prohibitive.
- During the 60-day enrollment period, consider all of your options to make an informed decision. Don't just think about the premium.
Who is Qualify for COBRA Insurance ?
Different employees and other people may be qualified for COBRA coverage under different sets of rules. Employees who qualify for COBRA coverage must also meet the other requirements listed above, which are covered in more detail below.
Normally, COBRA coverage must be made available to employers who have 20 or more full-time equivalent workers. Part-time workers' combined working hours can be used to form a full-time equivalent worker, which determines whether COBRA is generally applicable to the business. Plans provided by for-profit businesses and the majority of local and state governments are covered under COBRA. A statute comparable to COBRA provides coverage for federal employees.
Additionally, COBRA-like local legislation exist in numerous states. These can be referred to as mini-COBRA plans and normally apply to health insurers of firms with fewer than 20 employees. An employee who qualifies for COBRA must be enrolled in a group health insurance plan provided by their employer on the day before the qualifying event. More than half of the employer's normal business days in the prior calendar year must have been covered by the insurance plan.
For the departing employee to be eligible for COBRA, the firm must still provide its current employees with a health plan. The departing employee may no longer be eligible for COBRA coverage in the event that the employer goes out of business or discontinues providing insurance to current employees. The employee's health insurance must be lost as a result of the qualifying occurrence. The list of eligible beneficiaries is based on the kind of qualifying event, and each type of beneficiary has different requirements.
COBRA Eligibility
You qualify for COBRA insurance if :
- You had joined the health program offered by your employer.
- There are at least 20 people working there.
- The health program is still in effect.
- You stopped being covered due to a qualifying event.
Employees :
If any of the following apply, employees are eligible for COBRA coverage :
- Job loss, whether voluntarily or not, such as during the 2020 economic crisis (except in cases of gross misconduct).
- A reduction in hours worked that leaves the employer without insurance protection
- You had to have been employed and enrolled in a group health plan through your company.
Spouses :
In addition to the two qualifying events mentioned above for employees, the following criteria must be satisfied for a spouse to be eligible for COBRA coverage on their own :
- The covered employee gains Medicare eligibility.
- Divorce or a separation under law from the insured worker.
- The covered employee's passing away.
NOTE :
In the case of a divorce, a legal separation, or the loss of dependent status of a child, the employee or beneficiaries shall give notice to the plan.
Dependent Children :
With one addition, the qualifying events for dependent children are often the same as for the spouse :
- Loss of dependent status in accordance with the terms of the plan.
- You can be qualified for COBRA as well if you are a dependent of someone who meets the criteria listed above.
- You might be eligible if you're the employee's spouse who divorces or files for legal separation.
- A deceased employee's spouse may also be eligible for COBRA benefits.
Within 30 days of the employee-specific qualifying event, the employer is required to notify the plan. If the qualifying event involves a divorce, a legal separation, or the child's loss of dependent status, the employee or beneficiaries must inform the plan.
You can speak with the human resources division of your employer if you're unsure if you qualify for COBRA. You can also get in touch with the health plan's insurance provider.
COBRA Benefits and Available Coverage
According to COBRA regulations, eligible candidates may receive coverage that is the same as what the business provides to present employees. Qualified beneficiaries will also be affected by any changes to the plan's benefits for currently employed individuals. The same decisions must be available to all eligible COBRA beneficiaries as they are to non-COBRA beneficiaries. In essence, COBRA's insurance provisions for former employees and beneficiaries are identical to those for current employees and beneficiaries. At least 60 days must pass before you are offered the option to choose continued coverage. You can change your mind throughout the 60-day election period even if you waive coverage.
Depending on the relevant circumstances, COBRA coverage is only available from the date of the qualifying event for a limited time of 18 or 36 months. If one of the family's qualified beneficiaries becomes disabled and satisfies certain criteria, or if a second qualifying event takes place—possibly the passing of a covered employee, the legal separation of a covered employee and spouse, the employee's becoming eligible for Medicare, or the termination of the dependent child status under the plan—one may be eligible to extend the 18-month maximum period of continuation coverage.
Pros and Cons of COBRA Insurance
When choosing COBRA insurance, a person can keep their current doctor, health plan, and medical providers. Beneficiaries of COBRA continue to be covered for regular prescription medicines and any prior ailments. The cost of the plan may be less than that of other typical plans, but it is still preferable to going without insurance because it protects against having to pay hefty medical expenditures in the event of a sickness.
But it's crucial to remember COBRA's drawbacks as well. The high cost of insurance when it is paid for totally by the individual, the short COBRA coverage period, and the ongoing reliance on the employer are a few of the most noticeable of these. An ex-employee or connected beneficiary will no longer be eligible for COBRA if the employer decides to stop providing the coverage.
If the employer makes modifications to the health insurance program, COBRA beneficiaries are still required to accept such changes, even if the new program is not the best fit for their needs. For instance, a new plan might alter the amount of services offered and the coverage term, as well as raise or cut deductibles and co-payments.
For these reasons, those who are eligible for COBRA coverage should compare the advantages and disadvantages of COBRA with other individual plans to determine which one is the best fit. A potential COBRA recipient may also check to see if they are eligible for other state or municipal programs, such as Medicaid, or other types of public assistance. However, compared to other plans, such plans might only be available to low-income populations and might not provide the greatest treatment or services.
Healthy people may choose to consider a cheap healthcare discount plan. But because these plans don't count as insurance coverage, it may be challenging to get health insurance in the future because enrolling in one of them is regarded as interrupting insurance coverage.
How Much Does COBRA Cost ?
The majority of employers cover the costs of their employees' health plans, with the remainder being deducted from your wages. Workers typically pay 30% of the family premium and 20% of the individual premium. Your monthly COBRA payment may be five times more than your payroll deduction because you will be responsible for paying the entire premium amount under COBRA.
Despite the fact that it could seem expensive, COBRA rates are typically less than what you'd pay on the open market because you still get the group discount from your employer. You may use the money in your health savings account (HSA) to cover your COBRA premiums. (Typically, insurance premiums are not a qualified medical expense under the HSA.)
You have the option to change to a less expensive plan during the subsequent open enrollment period. For single and family coverage, high-deductible health plans (HDHP) have significantly cheaper premiums than other types of plans.
Early Termination of COBRA Health Insurance
In the following scenarios, COBRA coverage may expire early :
- Non-payment of premiums on time.
- Employer discontinues all group health plans.
- A qualified beneficiary changing employers, becoming qualified for Medicare, or participating in misconduct that results in coverage under a different group health plan (such as fraud).
How to Calculate COBRA Insurance ?
Add the percentage you will pay to the total monthly cost. Assume, for instance, that the total monthly cost of your insurance is $450 and that you must pay a 102 percent premium each month. To calculate the monthly premium, multiply $450 by 1.02 percent, which becomes $459.
How Much is COBRA Insurance ?
Expect the COBRA premium to cost between $400 and $700 per person per month, the same as major medical insurance, popularly known as Obamacare. Based on your prior paycheck contributions and the sum the company had subsidized, you can determine your monthly cost.
How to Apply and Enroll in COBRA Insurance ?
When you "sign up for COBRA," your employer's human resources department or its third-party administrator will re-enroll you in your prior plan.
Application Procedure for COBRA Enrollment :
You enroll in your plan through your former employer or their designated third-party administrator because COBRA is the same employer-based health plan.
Step 1 :
Learn more about the coverage and how to re-enroll in your health plan by reading the COBRA enrollment notification that was provided to you by the human resources department or the employer's third-party administrator.
Within 45 days of your policy expiring, you should get it.
Step 2 :
You can sign up for COBRA by submitting an online enrollment form, or you can fill out a paper application and mail it to the employer.
You'll have 60 days to decide whether to continue COBRA.
Note that COBRA is governed by federal law. Not an insurance provider or a certain strategy.
Employer Election Notice Of COBRA Must Be Sent Within 45 Days
The employer who sponsored the insurance must first give you notice before you can apply for COBRA continuation of prior health coverage. The qualifying occurrence must be reported by the employer to the group health plan within 30 days. The employer then has 14 days to inform you of your COBRA right to continue receiving work-related health insurance. The employer must submit the COBRA election notification to keep your health plan in place to you within a total of 45 days.
You Have 60 Days To Register And Enroll In COBRA
You have 60 days from the day you get your COBRA enrollment documents from your former employer to mail the election form back. You should contact the employer's human resources department and ask for the COBRA Administrator if you have any queries about the application.
Your COBRA coverage is effective going back to the day you lost your employment (or when the former insurance would have ended). There won't be a break in coverage as long as you send in the enrollment paperwork and premium payments. The Consolidated Omnibus Budget Reconciliation Act of 1985, sometimes known as COBRA, made certain legal rights available.
COBRA Deadlines
The following dates must be met in order to begin COBRA once your employer's health insurance expires :
- A qualifying incident caused your employer's work health insurance to expire.
- The employer sends you an election notice to reinstate your workplace insurance within 45 days of the qualifying incident.
- You have 60 days after the election notice to decide whether to re-enroll in your health plan, at which point the coverage will resume after you have paid the first premium.
- Your deductibles, copay's, coinsurance, out-of-pocket costs, and insurance cards for the entire year remain the same.
- Your first COBRA premium payment is due in 45 days.
- Any medical expenses you incur prior to the start of the COBRA plan may be filed for reimbursement as the coverage is retroactive.
Contacts
- COBRA Insurance Phone Number : 1-877-262-7241
- Toll Free Number : 1-866-444-3272
- Persons with disabilities upon request, Voice phone : (202) 693-8664
- TTY : (202) 501-3911
FAQ's
Why Enroll in COBRA ?
Your former employer's health insurance is approved under the Affordable Care Act. The primary benefit of COBRA is that it is a comprehensive medical plan that covers pre-existing diseases that necessitate treatments and doctor visits.
What Time Does Coverage Start ?
Following your first premium payment, your COBRA insurance will begin. Your benefits will be retroactive to the day your coverage would have otherwise ended if you make the decision to continue the employer group health plan. Your carrier might pay back any out-of-pocket costs you incurred between the time the coverage ended and when it resumed.
How long is COBRA coverage valid for ?
The circumstance that made you qualified for coverage determines how long you can remain on COBRA. As long as you can afford your payments, you can typically remain on COBRA for up to 18 months. If another circumstance arises in your life, you can be qualified for even more time. If you are disabled when you become eligible for COBRA or if you become disabled within the first 60 days of becoming eligible, you may be eligible for 11 more months. If you become eligible for Medicare within 18 months after your event, you may be eligible for up to 36 months.
What is covered by COBRA ?
The same benefits that your employer's health plan provides are also covered by COBRA insurance. Supplemental insurance including disability, life, hospital care, and other types of voluntary coverage are not covered by COBRA.
Is COBRA insurance pricey ?
The cost of COBRA may be much more than what you would have paid under your employer's coverage. Why? You are responsible for all of the health plan's expenses under COBRA. This includes any expenses that were formerly subsidized by your company. Despite the fact that it is the same health plan, the additional expense may increase the cost of your coverage.
Is COBRA health insurance right for you ?
Depending on your circumstances, COBRA provides both benefits and drawbacks. You receive the same level of protection as you did through your job. This means that even when you quit your employment, you can keep your health insurance plan. Do you anticipate having a long spell of unemployment? If so, COBRA coverage allows you to keep seeing your current doctors and benefiting from your health plan. However, COBRA can cost you far more, and it's only offered temporarily. Comparing alternatives, such as individual health insurance policies, may be beneficial.
What is the duration of my COBRA coverage ?
Despite the short duration of COBRA, you will have time to select a different plan. Federal coverage lasts for 18 months, beginning with the termination of your prior benefits. Some states offer 36 months of medical coverage, but not always dental or vision. To find out if your state offers COBRA benefits, speak with your benefits manager. While COBRA does not have a lifetime cap, some benefits do. You are qualified for the same benefits for the same duration each time you enroll.
What occurs if my COBRA coverage expires ?
Choose one of the options above if, when your COBRA expires, you haven't secured a new job with benefits. You prevent any coverage gaps, make sure to comparison-shop in advance. Dale and Debra may now choose the best health care options for them by properly analyzing COBRA benefits. They'll have one less item to worry about, allowing them to concentrate on the upcoming changes in their lives.
How do I make a COBRA payment ?
You'll be required to pay the entire cost of your insurance premium plus a COBRA administrative fee. When you work, your employer typically contributes to a portion of your health insurance costs. As a result, you'll probably pay more for COBRA, which, depending on the type of coverage you have, may get expensive.
What are the limits of COBRA coverage ?
It's a good idea to look into alternative choices as COBRA coverage is only a temporary fix. There are a few more reasons for your COBRA coverage to expire in addition to the typical time frame of 18 to 36 months.
- Your premium payments are late.
- Your previous workplace no longer provides any group health coverage.
- A new employment provides coverage that is equivalent.
- You are now qualified for Medicare.
What is the Eligibility for Dependent COBRA Coverage ?
In certain qualifying circumstances, COBRA also extends coverage to partners, ex-partners, and dependent children. If the primary beneficiary enrolls in Medicare, if the insured worker passes away or gets divorced, or if they turn 26 and lose their eligibility for their parent's group health plan, dependents may be eligible for up to 36 months of coverage.
TIP : COBRA insurance premiums may be expensive. If you have a health savings account (HSA), consider utilizing the funds to pay for or partially offset the higher premiums as well as for medical costs. Regular insurance premiums cannot be paid using HSAs.
What is the Benefits COBRA Insurance ?
When an employee leaves their job or has their work hours reduced, the Consolidated Omnibus Budget Reconciliation Act (COBRA), a health insurance program, permits eligible employees and their families to continue receiving the benefits of health insurance coverage.