Continued Health Insurance COBRA

Consolidated Omnibus Budget Reconciliation Act (COBRA), is a program that helps you bridge gaps in your employer-provided insurance during periods of unemployment.

COBRA helps you lessen the impact that losing your job has on you and your family’s wellbeing in terms of health insurance coverage. However, your employer might not offer COBRA insurance. In that case, you must look in your State’s insurance marketplace for a private health care plan.

Moreover, COBRA continued health insurance will also cost you more than the health insurance plan you received during your full-time employment. Due to not being subsidized in the same way other plans are, COBRA benefits will signify a higher out-of-pocket expense.

However, your former employer will still manage your policy, and you must participate in the program through the company if you decide to enroll in COBRA. To better understand how COBRA works and how you can obtain health care benefits through the continued insurance program read the sections below.

Understanding COBRA Insurance

The COBRA continued health insurance program was established in 1986 to protect people from being uninsured due to job loss. When you become unemployed, you may not be able to secure a new insurance plan due to a lack of notice from your employer.

You should be aware that you will only qualify for COBRA coverage if the reason for becoming unemployed falls under the guidelines of the program.

COBRA Eligibility Requirements

To qualify for COBRA insurance coverage, you should have been terminated by an employer for any reason other than gross misconduct. You may also qualify for COBRA health benefits if your employer reduces your work hours below the limit that would make you eligible for regular coverage.

The minimum number of hours you must work to receive employer-provided insurance coverage is set by the health insurance plan that you would receive under regular employment conditions.

Furthermore, your spouse and other dependents may also qualify to receive COBRA health benefits if you meet the program’s requirements. Your spouse will also receive COBRA benefits in the event of a divorce or if you become eligible for Medicare. Spouses and dependents of a beneficiary also qualify for COBRA benefits in the event the enrollee becomes deceased.

Medical Coverage Under COBRA

With COBRA, you will receive the same types of benefits that you received during your employment period. You will also have identical options for different health plans that you can choose. Moreover, you will have the ability to choose from different provider networks, premiums, and other important features.

Once you choose a plan, you will be eligible for a coverage period that ranges between 18 and 36 months. The amount of time you receive coverage for depends on the conditions of your termination. Moreover, your employer cannot shorten the time that you receive benefits. On the contrary, your former employer might extend the amount of time for which you receive benefits.

You can request for an extension of benefits if you only qualify for 18 months of health care coverage. Moreover, all your family members may be entitled to an 11-month extension period if you, the primary beneficiary, are considered disabled. Other events that may qualify for an extension of coverage include:

  • Death of the primary beneficiary
  • Divorce of plan beneficiaries
  • Loss of dependent child status
  • Other changes that fall under the plan’s rules for extension

Note: Keep in mind that insurance providers are allowed to increase the costs of coverage during extension periods for up to 150 percent of your plan’s premium.

How much doe COBRA coverage cost?

When you enroll in COBRA, you will notice that the plan’s cost may not be the most affordable one. This plan is primarily intended to help you maintain insurance coverage after your termination but is not necessarily affordable in most cases. For example, you will notice that the COBRA plan you enroll in will be more expensive than the plan you had when you were employed.

Most of the cost increase in your COBRA plan comes from an increase in the plan’s premium. This increase in costs will significantly increase your annual spending on healthcare. Other aspects of your policy like copayments and deductible amounts may remain the same.

Due to its high cost, you may only consider that COBRA is beneficial to you if you have specific needs that require constant coverage for uninterrupted medical care. Otherwise, a private health insurance plan through a federal or state program may be a better alternative for you.

Moreover, you may qualify for a federal tax credit as an eligible COBRA beneficiary. This tax credit will help you cover part of the expenses for your COBRA health care premium. Before, this benefit came along with your yearly tax refund, but after 2017 you can receive this tax credit as a monthly payment.

How to Apply for COBRA

The process for signing up for COBRA continued insurance starts when your employer contacts a group insurance provider. They will let the provider know about your change in status, and the insurance group will reach out to you to provide you with more information about your new health insurance plan.

The information that you will receive includes how much your new premium will be and how much coverage you will receive. Other features of your COBRA health plan will not vary from the original insurance you had when you were employed.  

Moreover, you must pay the first premium payment to start receiving COBRA insurance coverage. Keep in mind that you can cancel your COBRA plan at any time without penalty. Therefore, you can pay for continued insurance coverage until you find a more affordable plan through a private health care provider.

You can also waive your rights to receive COBRA coverage, and if you change your mind later on, you can request coverage as long as it is during the valid enrollment period.

How to avoid losing COBRA coverage?

Besides missing on your premium payments, there are other reasons that may cause you to lose your COBRA coverage. For instance, if your former employer stops providing employer-related insurance, you will no longer be able to receive COBRA benefits.

Receiving benefits from another health insurance or if you become eligible for Medicare will also cancel your participation in the program. Moreover, you will not receive benefits if under COBRA’s guidelines you commit fraud.