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COBRA Insurance Guide

Guide to understanding COBRA Insurance

Cobra Insurance Guide

The term COBRA insurance is one that is often heard, although few people actually know what COBRA insurance is until they find themselves on the verge of losing group health insurance. COBRA health insurance, in the simplest terms, is a federal law that allows employees and their families to continue health insurance coverage after the loss of a job or a reduction in hours. The term COBRA stands for Consolidated Omnibus Budget Reconciliation Act which is the legislation that passed in 1986 that requires employers to provide optional continuation of health insurance to employees. Now, most often referred to simply as COBRA insurance, this act protects employees and their families from suddenly finding themselves without medical insurance.

Now that you understand what COBRA insurance is, likely you have many questions about the specifics of qualifying for COBRA insurance, its costs, how long it lasts, as well as what you have to do to sign up for coverage. This guide will provide you with those answers, as well as assist you in starting the COBRA insurance process.

Eligibility

There are three key elements of understanding whether you and your family qualify for COBRA insurance. First, you need to determine if your company's insurance plan qualifies under COBRA. Second, you need to determine who is eligible for coverage. This is commonly referred to as Qualified Beneficiaries. Finally, you need to determine if what caused you to lose health insurance coverage qualifies. This is commonly referred to as the Qualifying Event.In order to receive COBRA insurance you must meet all three requirements.

  • Type of Insurance Plan Coverage: In order to be eligible for COBRA insurance, your group health insurance plan must cover 20 or more employees for more than 50% of its typical business days. Both part time and full time employees count towards qualification of a plan under COBRA insurance. The easiest way to know if your current plan qualifies is to ask your employer.
  • Qualified Beneficiaries: Under COBRA insurance, anyone who was covered under the employer's plan will continue to receive coverage in almost all cases. This could include the covered employee, spouse, and dependent children. For a retiree, this would include the retiree, retiree's spouse, or retiree's dependent children. In some cases agents, independent contractors, and directors who participated in the health insurance plan of a partner company may also qualify for COBRA insurance.
  • Type of Qualifying Events: In order to qualify for COBRA insurance, you must have qualifying event that entitles you to COBRA insurance coverage. It is important to know that qualifying events include both voluntary and involuntary job less, as well as reduction in hours. Qualifying events also differ for each beneficiary.
    • Covered Employee
      • Voluntary or involuntary termination of employment for any reason other than "gross misconduct"
      • Reduction in the number of hours of employment
    • Spouses:
      • Voluntary or involuntary termination of the covered employee's employment for any reason other than "gross misconduct"
      • Reduction in the hours worked by the covered employee
      • Covered employee's becoming entitled to Medicare
      • Divorce or legal separation of the covered employee
      • Death of the covered employee
    • Dependent Children:
      • Loss of "dependent child" status under the plan's rules
      • All qualified events listed under spouses

Cost

COBRA insurance costs are based on the insurance premium cost under the group insurance plan you participated in as an employee. Depending on your employer, they may have paid the entire premium or part of the premium. Under COBRA insurance benefits, you will be responsible for paying the entire premium with an additional 2% in administration costs. Although this may seem high, it is still significantly less than you would pay for similar heath insurance coverage if you bought individual or family health insurance. It is also important to know that when you sign up for COBRA insurance, you will be responsible for any monthly premiums retroactively since the date of employment loss since the coverage covers that entire period. Your first monthly COBRA premium will cover that retroactive period. Also, some employers subsidize, or pay for, part or all of the cost of COBRA insurance so it is important to ask your employer if they offer this benefit.

Length of Coverage

Normally COBRA health insurance benefits last for 18 months, however in some circumstances they may extend to 36 months if the covered employee has a second qualifying incident during the time they are covered by COBRA. COBRA insurance benefits start from the day that coverage was lost. However, there are many reasons that COBRA insurance coverage end coverage before the maximum allotment. COBRA coverage may be terminated early if you fail to pay your premium, if the employer ends their group health coverage, if health insurance coverage is provided by a new employer, or if the person qualifies for Medicare coverage during their COBRA coverage.

Signing Up

Generally employers must notify the group health insurance provider within 30 days of the qualifying event that causes loss of health insurance. This is the start of the process for signing up for COBRA insurance. . Once the initial notification happens, the group health insurance provider has 14 days to send an election notice to the affected parties which provides them with the details and option for signing up for COBRA insurance benefits. From there, you have 60 days to decide if you would like to sign up for COBRA. In order to sign up, you must complete the election form and pay the initial premium. If you are a qualified beneficiary (i.e. spouse, dependent child, former spouse, etc.) you must notify the group insurance health provider within 60 days that your insurance has been lost, so that they can send you the COBRA insurance election form and you can sign up for COBRA.

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