COBRA Continued Health Insurance

The Consolidated Omnibus Budget Reconciliation Act, better known as COBRA continued health insurance, is a health insurance program meant to help workers bridge the gap in employer-related insurance coverage that can occur during periods of employment.

COBRA health plans help lessen the impact of losing a job on the well-being of workers and their families.

Only companies with more than 20 employees are required to offer COBRA continued insurance options for previous employees. When no COBRA options are available, those looking for health insurance must search the state marketplace for a private plan. Because COBRA plans are not subsidized in the same way as most employer-related health insurance plans, they tend to cost enrollees significantly more than when the enrollee was fully employed.

Former employees of companies that offer COBRA insurance must apply to participate in the program through the company, which would still manage the policy. Read on for more important information about COBRA continued health insurance, including eligibility criteria, benefits, cost, application procedures and more.

What is COBRA insurance and who is eligible for it?

COBRA continued health coverage was established in 1986 with the passage of the Consolidated Omnibus Budget Reconciliation Act. Its purpose was to protect the newly unemployed from losing their health coverage without enough notice to secure new coverage. However, former employees must have lost their jobs and health coverage due to a qualifying event as determined by COBRA guidelines.

Events that qualify the newly unemployed to receive COBRA health benefits include termination of the enrolled employee’s employment contract for any reason other than gross misconduct. Some employees may also qualify for this health insurance after a reduction in the hours worked by the covered employee to below the limits of what is required to qualify for employer-based health insurance coverage.

Spouses and dependents of enrolled employees may qualify for COBRA coverage if the covered party meets either of the two previously mentioned qualifications or if the enrolled employee becomes eligible for Medicare. Spouses who divorce from the enrolled party and spouses of deceased enrollees also qualify. Dependent children who were part of an employee’s insurance plan and who are older than 26 years of age will often lose coverage under the job-related plan and therefore be eligible for COBRA coverage as well.

What medical coverage is included in COBRA plans?

The COBRA health care plan that your former employer offers you should be identical to the coverage offered to similarly situated employees and their families. This also applies to having identical options for different health plans with different provider networks, premiums and other features. In most cases, your COBRA plan will be identical in coverage to the plan you had during employment.

The time period for which a COBRA continued health care beneficiary can receive benefits is 18 or 36 months, depending on the qualifying event that resulted in the enrollee’s COBRA eligibility. Employers can choose to provide COBRA coverage to former employers for longer than this period but not shorter.

Employees who would otherwise only be eligible for 18 months of COBRA continued insurance coverage may request an extension of benefits. If any qualified household beneficiary is considered disabled, all family members on the health care plan are usually entitled to an 11-month extension period. Insurance providers are permitted to increase the costs of coverage during these extensions periods, however, to up to 150 percent of the regular plan premium.

Another way that former employees are able to extend their eligibility for COBRA coverage is by demonstrating that a second qualifying event has occurred within the last 18 months. Qualifying events for an extension most commonly include the death of the former employee, divorce of plan beneficiaries, loss of dependent child status under the plan rules and more.

How much does COBRA coverage cost?

COBRA continued health care was created to bridge gaps in workers’ health insurance coverage, not to be the most affordable health insurance option. In fact, COBRA health insurance plans almost always cost more than the same plan did while you were gainfully employed because the plan will no longer have its premium costs subsidized by the employer.

While other aspects, such as deductibles and copayments, of the total cost of the insurance plan remain constant when a plan is converted to COBRA continued coverage, the spike in premium costs can significantly increase your annual spending on medical care. Because of these increased costs, COBRA plans may be better for workers with specific health care needs who know that they will require regular medical care and want the standard of that care to remain constant. For workers who are in good health and who do not anticipate any serious medical needs in the near future, choosing a less comprehensive but still ACA-certified private insurance plan through a federal or state Health Insurance Marketplace may be the better option.

Some workers who are eligible for COBRA continued coverage are also eligible to receive a federal coverage tax credit. It is meant to help you make monthly premium payments toward your COBRA insurance plan and other related medical costs. In the past, this tax credit was always added to your tax returns for the previous year. As of 2017, however, qualified insurance enrollees may also be able to receive this tax credit as an advance monthly payment instead of having to wait until the next year to claim the funds.

How do I sign up for COBRA continued coverage?

The process for signing up for COBRA coverage begins with the employer. Once a former employee becomes eligible for COBRA insurance, the employer will contact the group health insurance provider to let them know of the change in the employee’s status. Once notified, the insurance provider will reach out to the former employee with information about COBRA continued coverage, the premiums they will be expected to pay and the dates of service. As mentioned above, the specific features of the health insurance plan offered through COBRA should not vary significantly from the health care plan you had while employed, except for the annual premium costs.

To begin receiving COBRA health care coverage, the former employee sends in the first new premium payment. Because COBRA insurance can be cancelled at any time without penalty, the newly unemployed can feel comfortable purchasing COBRA coverage only until she or he finds a private plan that better suits her or his needs. If you decide to waive your rights to COBRA insurance but later change your mind, you can take back your waiver and request COBRA continued coverage as long as it is still during the enrollment period.

Can I lose access to COBRA coverage?

You may lose your rights to COBRA coverage for a few different reasons. If you fail to make regular premium payments, your participation in the program can be canceled. If the employer stops offering employer-related coverage, you will no longer have the option of participating in the COBRA program.

Qualified COBRA health care plan beneficiaries who begin to participate in another plan after choosing to enroll in COBRA will have their coverage cancelled. In addition, otherwise qualified COBRA enrollees who become eligible for Medicare will lose eligibility for COBRA benefits. Inappropriate conduct in regards to the COBRA program, such as committing fraud, can also result in loss of coverage.

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