Everything You Need To Know About COBRA Insurance

Thanks to the Consolidated Omnibus Budget Reconciliation Act 1985 (COBRA), you don’t have to lose the health insurance provided by your former employer. But you have to pay full price as well as an administration fee of up to two percent.

COBRA health insurance provides continued group health coverage when you quit, retire or are fired from a job that offers a qualifying plan. It can also be applied if your hours are reduced so that you no longer meet your employer’s criteria for plan eligibility. The only exception is dismissal for a serious offence.

Who is Eligible for COBRA Coverage?

To be eligible for COBRA you must forfeit the insurance provided by your employer because:

  • You’re fired (unless you’re dismissed for a “grave offence.”)
  • You quit your job.
  • You are no longer eligible for employer-sponsored coverage because your hours have been reduced.

Dependents may also use COBRA if they lose eligibility due to:

  • A dependent child is 26 years old and no longer eligible for coverage under the parental plan.
  • Protected employee died.
  • Protected spouses are divorced or legally separated.
  • Covered employees become eligible for Medicare.

What are the COBRA Coverage Rules?

COBRA laws only apply to the private sector and state and local governments with a minimum of 20 employees, although some states also have shortened versions of COBRA insurance for employees of companies with fewer than 20.

COBRA coverage can last up to 18 months, and sometimes up to three years if the reason for the loss of job-based coverage differs from the standard criteria for loss of work or hours worked. You can cancel COBRA coverage at any time.

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After the employer notifies COBRA that you are no longer eligible for employer-provided insurance (within 30 days of the incident), you have approximately 60 days to notify COBRA if your eligibility is due to divorce, legal separation, or dependent children have reached age of 26.

If you decide to exercise your COBRA rights, you have 60 days from the triggering event to apply. Be aware that you will be taking up the entire tab. While group rates are generally more profitable than
individual health insurance rates, plan to experience a sticker shock. But even with the hefty price tag, there are definite benefits to maintaining continuous coverage until you can find another job, especially if you’re older or have health issues.

Under COBRA, you must be offered the same coverage you had immediately before you are eligible for COBRA continued coverage. Any changes to the group plan for active employees will also apply to you, and you must be allowed to make the same choices you were given to them, such as the plan options offered during open enrollment. COBRA also limits the premium you can charge. Currently, it cannot exceed 102 percent of the cost of the plan, including those paid by employees and employers, plus 2 percent for admin fees.

What are the Alternatives to COBRA?

If you don’t want COBRA insurance, you can take a different path to health coverage.

  • Purchase a package through an agent or broker.
  • Get Affordable Care Act coverage, with additional help if you qualify.
  • Buy a short term policy.
  • Wait until you get another job that offers insurance.
  • Do your research and find a policy that fits your needs and budget online.
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