Losing your job is stressful. It could be for any number of reasons, many of which are entirely out of your control. Unfortunately, life happens. If your employer previously offered health insurance benefits linked to your employment, you’ll have lost those perks as well. With stress after stress, what’s there to do in a situation like this? Health insurance provides employees and their families with peace of mind knowing that they have financial protection in the event of a medical crisis.
Enter COBRA. Consolidated Omnibus Budget Reconciliation Act (COBRA) is a type of health insurance program in the United States that you can opt to use within 60 days of losing your job as a temporary replacement for your job-based medical coverage. COBRA is available to eligible employees and their families as continued health insurance coverage. It may even be available to employees and their dependents who have not lost their jobs but whose work hours have been severely reduced.
How does COBRA work, and what benefits does it offer? Read on for more information.
Who is Eligible for COBRA Insurance?
To qualify for COBRA insurance, individuals must meet particular qualifying events. These events may vary by the insurance provider. Typically, employers that have 20 or more full-time employees may be required to offer COBRA coverage in nearly every state/local geographical region. In most cases, the working hours of multiple part-time employees can be cobbled together to create the equivalence of a full-time employee. Federal employees are typically eligible for coverage under laws similar to the ones COBRA presents and COBRA will almost always apply to plans that are offered by private-sector employers, including those sponsored by state and local governments.
COBRA insurance coverage may be terminated early if the following occurs:
Failure to make premium payments
The employer terminates all group health plans
The beneficiary gains coverage under a new group health plan, such as with a new employer or under Medicare
Acts of fraud or dishonesty
How Does COBRA Health Insurance Work?
As a general rule of thumb, employers in the United States that have 50 or more full-time workers must provide health insurance to any qualifying employees and will be required to pay 50% or more of their insurance premiums. In the event that an employee’s hours are reduced or they are laid off and become ineligible to receive their employer’s health insurance benefits, the employer is exempt from having to pay their share of the employee’s insurance premiums. COBRA can kick in and enable an employee (as well as their dependents) to maintain their existing health insurance coverage for a specific period of time, so long as they are willing to pay the full premiums on their own.
COBRA determines that former employees, their spouses, dependents, and even former spouses must be provided this option to continue their health insurance coverage at the same group rates as before. Individuals who opt for COBRA Insurance will be paying more (as their employer will no longer be covering a percentage of their premiums). However, some former employees or employees with reduced hours will find that COBRA Insurance, even without an employer’s aid, is less expensive than purchasing a separate individual health insurance plan.
COBRA Insurance typically will not include things like disability insurance or life insurance but may include programs that cover costs for dental treatments, vision care, and even prescription drugs.
Which group plans are considered subject to COBRA Insurance?
All group health plans that are maintained by employers with over 20 full-time employees, or according to their local/state government may apply to COBRA Insurance laws. However, there are exceptions with plans that have been sponsored by Federal Government, churches, and church-related organizations. You may want to check with your state insurance commissioner’s office to assess whether coverage is available with your current circumstances.
What alternatives can be used in place of COBRA Insurance?
If you are an employee and have lost your job and qualify for COBRA Insurance, you may wish to check your other available options before making a final decision. Some other options may be more affordable, offer more coverage options, and may even extend to covering your family members as well. If you live with a spouse who is employed, they may have a plan that can be extended to cover you as well.
The Benefits of COBRA Insurance
COBRA provides coverage that is identical to the coverage that the employee would have been receiving from their employer, only without the employer stepping in to cover a certain percentage of their premiums. If there are any changes to the offered health plan, that change will also apply to any qualifying beneficiaries the same as it would to eligible employees. Following termination or reduced hours, an employee has 60 days to choose whether they want to opt for COBRA insurance or find an alternative program elsewhere (such as through their spouse’s health insurance coverage). You can change your mind on any decision you make within that period.
After the qualifying event, COBRA coverage can extend for a specified period of time – usually 18 or 36 months, but it depends on the situation. If someone in the family is disabled during the 18 month period, the beneficiary may choose to extend coverage. Coverage may also be extended if an additional qualifying event occurs, such as if the insured employee and the spouse are separated or if there’s a loss of dependent child status or if the covered employee becomes eligible for Medicare or in the event that the covered employee dies.
Is COBRA expensive?
While COBRA may be less expensive than an individual plan, it is still relatively costly compared to employer-provided health insurance as an employer can pay up to 80% of the group health insurance premiums. The increased cost may be significant. There’s no reduction, but the cost now has to be handled solely by the covered individual alone. There are alternative options that may be less expensive, especially for those who lost their health insurance due to the 2020 economic crisis as a result of the COVID-19 pandemic. It’s worth looking around for alternatives, but in many cases, COBRA Insurance is still less expensive than many standalone plans.
For more information regarding COBRA Insurance, contact a Hitchings Insurance Agency representative. We can answer any questions you may have about COBRA and provide you with further insight into other health insurance options.