Comprehensive COBRA Insurance Information

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COBRA Insurance Basics

The first and perhaps most important thing to know about COBRA insurance is that it is actually not a health insurance plan at all, it is a law. In 1986 the federal government passed a law known as the Consolidated Omnibus Budget Reconciliation Act that protected individuals and families from suddenly losing health insurance. This law, normally known as COBRA or COBRA insurance, allows qualifying individuals and families to keep their heath insurance after voluntary or involuntary job loss.

Under the current law there are three main requirements that individuals or their family members must meet in order to qualify for COBRA: qualifying plan (sometimes known as employer requirements), qualifying beneficiaries, and qualifying event.

Qualifying Plan / Employer Requirements

The first requirement set forth in the COBRA legislation is what types of plans qualify for COBRA continuation. In general, employers have to 0ffer COBRA when:

  • There is an employer sponsored health insurance plan
  • At least twenty employees, or their part time equivalents, are on the plan

Currently people who work for the federal government do not qualify for COBRA but can keep their health insurance benefits after job loss under a different law. If you work for the federal government and are interested in what you can do to keep your health insurance, contact your plan administrator.

Qualified Beneficiaries

COBRA insurance coverage isn't only for the employee, but also can be used by the spouse, dependent children, and in some cases other dependents. The employee must have been using the health insurance plan before signing up for COBRA and they must also have a qualifying event.

When you are signing up for COBRA insurance you can decide you would like to cover and for whom you may want to choose a different health insurance option. Any person who was previously covered can remain covered with COBRA whether or not the former employee chooses to use COBRA. This can be a great way to save money for many since they only keep the person with serious medical needs on COBRA and find more affordable insurance for the rest of the family.

Qualifying Events

There are many different situations that can qualify an individual for COBRA insurance coverage. The chart below summarizes the most common qualifying evens for COBRA.

Qualifying Events for COBRA
Employee
  • Leaving your job voluntarily, including quitting and retiring
  • Leaving your job involuntarily, including being laid off or fired, as long as gross misconduct isn't present
  • Having your work hours reduced to a point that you no longer qualify for health insurance

Employee's Spouse
  • The employee leaves his/her job voluntarily, including quitting and retiring
  • The employee leaves his/her job involuntarily, including being laid off or fired, as long as gross misconduct isn't present
  • The employee has his/her work hours reduced to a point that you no longer qualify for health insurance
  • The employee becomes entitled to Medicare
  • There is a divorce or legal separation
  • The covered employee passes away

Dependent Children
  • The employee leaves his/her job voluntarily, including quitting and retiring
  • The employee leaves his/her job involuntarily, including being laid off or fired, as long as gross misconduct isn't present
  • The employee has his/her work hours reduced to a point that you no longer qualify for health insurance
  • The employee becomes entitled to Medicare
  • There is a divorce or legal separation
  • The covered employee passes away
  • The child loses dependent status

COBRA Insurance Coverage

Once you know whether or not you qualify for COBRA, the next piece of the puzzle is understanding the coverage provided by COBRA. The coverage will be exactly the same as it was with your employer since it is the exact same plan. The main difference will be how much it costs for health insurance plan. Under COBRA you must pay the full premium and a 2% administration fee. Learn how much COBRA will cost you.

The other important thing to note about COBRA insurance coverage is that any change to your employer's health insurance plan will also affect your plan, just as if you were still employed. This also means if the plan is cancelled for any reason, your plan with COBRA will also be cancelled.

Employer Responsibilities with COBRA

Your employer has two main responsibilities when it comes to COBRA insurance. First, when you initially sign up for a health insurance plan you are usually provided with an "Initial notice" that outlines your COBRA rights. Then if you are going to lose health insurance due to a qualifying event, you should receive a "Specific Notice" or COBRA election form that tells you the rates and how to sign up for COBRA.

Your Responsibilities with COBRA

For some qualifying events, it is your responsibility rather than your employers, for notification. If you go through a divorce, legal separation, or your child is losing dependent status, you must notify your employer or plan administrator of this. In most cases, you have 60 days to inform your employer.

Electing or Choosing COBRA

Upon getting your COBRA election form, you will have 60 days to decide whether or not you want to sign yourself or any family members up for COBRA insurance. The coverage will be retroactive back to the date the health insurance would have been lost when you sign up.

COBRA Term Length

In most circumstances, COBRA lasts for 18 months, but sometimes longer in cases or disability, divorce, death, or loss of dependent status. The coverage begins from the day you would have lost health insurance coverage, not from the date you submit your election form. You can lose your coverage if you fail to pay your premiums, become eligible for Medicare, get new benefits from employment, or your employer cancels the health insurance plan.

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