When I resigned from my job a few years ago, I met with my HR rep at my office to go over a few things before my final day.
One of the topics we covered was COBRA Insurance or COBRA continuation coverage.
Health insurance is one of the most important safety nets that you can have for you and your family.
You never know when there is going to be an accident, and that accident could lead to thousands and thousands of dollars of medical bills and other expenses.
If you didn’t have health insurance or the right type of coverage, you and your family could be responsible for a massive amount of bills.
This article is going to explore the different areas of COBRA insurance and how you can use COBRA to your advantage.
Hopefully, this article is going to answer any of the questions that you have.
Table of Contents
What Exactly is COBRA Insurance?
COBRA stands for Consolidated Omnibus Budget Reconciliation Act of 1985 and is a federal law which helps employees maintain health care coverage when they would otherwise lose it from a “qualifying life event,” including resigning from a job or filing for unemployment.
Basically, COBRA health insurance coverage guarantees employees the right to keep their group health care coverage for up to 18 months when they would otherwise lose it after leaving their job.
COBRA generally covers employees who resign or are terminated for any reason other than “gross misconduct.”
However, there is one big difference.
While employees are guaranteed the right to the same health care coverage they previously had, they are required to pay for all of it out of their own pocket.
Their former employer is not required to subsidize the payments. Employers often cover a substantial portion of health insurance premiums, so COBRA coverage can be expensive.
COBRA Coverage can also be made available to an employee’s family members, sometimes for up to 36 months.
COBRA is not available for individual health care plans that are purchased outside of a group plan through an employer or an association. If you lose individual health care coverage, there are no COBRA laws that require an extension.
There are also similar plans covering health care after leaving the military.
If you find yourself suddenly out of a job, losing health insurance coverage is going to make the situation a thousand times worse, especially if something were to happen to you or one of your family members.
COBRA is a perfect way for any employee to continue to have insurance protection if they were to quit or lose their job.
It’s there to ensure that you aren’t left without proper insurance protection. COBRA is a unique plan with a lot of different aspects that you should be aware of if you’re looking to take advantage of the plan.
How is COBRA Coverage Provided?
You must contact your human resources department and inform them when you have a qualifying life event, generally within 30 or 60 days of the event, depending on the type of event.
Once your HR department has been made aware of the life event, they are required to offer qualified beneficiaries COBRA coverage.
Each qualified beneficiary has the independent right to elect or decline coverage. From there, payments will be arranged through your company or their group health care provider.
If you’re eligible for COBRA coverage, your health plan will give you a notice that shows you have a right to continue your coverage. As soon as you decide to continue your coverage under COBRA, you’ll then be responsible for paying for your insurance coverage.
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When Does COBRA Coverage End?
COBRA Coverage can extend up to 18 months for the employee, and up to 36 months under certain conditions for a spouse or dependents.
There are certain conditions that will cause COBRA coverage to end, including:
- Reaching the last day of COBRA coverage (after 18-36 months)
- The employer ceases to offer a group health care plan
- The employer goes out of business
- The beneficiary obtains coverage elsewhere
- The beneficiary doesn’t pay the premiums
- The beneficiary is entitled to receive Medicare benefits
It’s important that you understand all of the circumstances that could cause you to lose coverage through COBRA.
The reasons above are only some of the broad reasons that you could lose your health insurance plan protection, and not having health insurance is one of the worst things that you can do to your family and loved ones.
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What Does COBRA Cover?
There are several broad categories that COBRA enrollees will be covered for. There is nothing that you can do about the rising cost of healthcare, but there are some ways that you can offset that bills to protect yourself from paying for massive bills.
COBRA coverage will help pay for both inpatient and outpatient hospital care, as well as physician care.
It will also pay for any surgery or other major medical benefits that you could face depending on your health. Beneficiaries will also enjoy coverage from prescription drugs.
Every year the price of medications is going higher and higher, and it’s important that you have the prescriptions that you need, without having to foot the bill yourself.
One of the requirements of COBRA coverage is that it must provide identical protection that the beneficiary was receiving before they enrolled in COBRA.
If you were receiving vision and dental on the group coverage when you were employed, then you’ll still have that same coverage when you’re utilizing the COBRA rule. Because vision and dental are not considered “core benefits,” then you can elect to eliminate those from your coverage and lower your premiums.
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Alternatives to COBRA
If you decide what you don’t want to participate in COBRA, for whatever reason, there are some other options that you have that you can use to get health insurance.
One obvious choice is to enroll in a government health insurance place. There are plenty of options under the Affordable Care Act, which will give you affordable health insurance protection.
These plans have different requirements and coverages that you’ll need to compare when you’re looking to get the perfect plan for you and your dependents.
There are several different levels of coverage, some of them offer more insurance protection than other levels.
Another option is to get health insurance through your spouse’s insurance plan. If your spouse has the option to get coverage through their workplace, then you can add that coverage for you and your spouse, which will tend to be a cheaper option than getting a private plan without employer assistance.
One thing that you should always avoid is skipping health insurance coverage altogether.
It’s extremely risky and that could have dire consequences.
Even if you don’t want to pay the premiums for the quality coverage that you had from your employer, you should still consider purchasing a plan that will protect you with catastrophic coverage.
Should You Elect for COBRA Coverage?
This is a very personal decision.
While COBRA can be very expensive (sometimes prohibitively expensive), it will allow you to keep the same group health care coverage as you had while you were with your employer. COBRA also extends to spouses and dependents in events such as a divorce or the death of an employed spouse.
This may be the only way to maintain coverage.
In my opinion, health care insurance is essential. I would at least consider COBRA coverage until you can investigate other options.
Before applying for COBRA coverage, you should at least investigate individual health insurance, which will probably be a cheaper option (though you may not be eligible if you have a preexisting condition). You can find search for health insurance at eHealthInsurance.com for multiple rate quotes.
When you’re shopping for health insurance coverage, it can be a long and difficult search.
There are dozens and dozens of different factors to consider to ensure that you’re getting the best plan. Because of the world that we live in, you never know what’s going to happen to your job or your health insurance protection.
If you have any questions about health insurance or about COBRA coverage, please contact me today.
I would be happy to answer those questions and ensure that you’re getting the perfect coverage for both you and your family. If you’ve lost your job for whatever reason, don’t assume that you have to go without health insurance protection.
Disclaimer: This article is intended to serve as a primer for COBRA coverage.
There are many situations that can affect an individual’s eligibility. Please consult with your HR department or another professional for more detailed information.
You can also visit the Department of Labor website for specific questions, or for information about the regional office in your area. You may also call 866-444-EBSA for publications or to be directed to the office in your area.
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Jenny says
Hi, my question is, Can I have COBRA for only 1 month?
Steveark says
Very accurate post! I retired early 18 months ago and selected cobra coverage for the full 18 month period. It runs out at the end of this month. I just shopped replacement coverage and it is more expensive than my cobra was because I am on the older end of the age range. If I was younger it would have been much less.
Jackie says
A little over two years ago had to leave my job due to an injury outside the job site-not work related. I have been unable to return to my job due to the injury. I work for a public school system in South Florida am I able to qualify for COBRA?
Ryan says
Jackie, there is usually a time limit for COBRA benefits. You will need to contact your former employer for more information specific to your case, since this program is run through your previous employer. Best of luck.
gladys grisafr says
i would like to know if you can get corba after the 18 momth.i need 9 month to be 65 and after june 1 i want have any insur.
Christine says
Stephanie,
I thought there was a 30 day grace period for paying your Cobra premium. Maybe check on that.
stephanie says
We just got put on Cobra and we were 5 days late in our payment of our premium and we were cancelled. We paid for June and July was 5 days late. What do we do NOW? I have over 800$ in perscriptions a month.
Troy says
Millions of Americans who lost their jobs prior to September 1, 2008 could not afford Cobra. Millions more elected Cobra but have now depleted their resources and can not continue on. Still millions more with pre-existing conditions who rely on cobra to bridge the 18 month gap between their former employers insurance and their state’s high risk insurance pools are struggling to pay their premiums every month to prevent being locked out of insurance permanently.
Please join us in asking Congress and the Obama administration to eliminate the arbitrary September 1, 2008 cut-off date and 9 month limitation of assistance by signing our petition
For more information please see our website by clicking on my name.
Ryan says
Michael: Congrats on your new grandchild. I hope he/she and the mother are both healthy and doing well.
This is all the information I have about the new COBRA benefits: Unemployment and COBRA Benefit Provisions in the 2009 Economic Stimulus Plan.
As part of this stimulus bill, the government will subsidize 65% of the COBRA premiums for workers who were laid off between Sept. 1, 2008, and Dec. 31, 2009. If you were laid off between Sept. 1, 2008, and now, then you should qualify for the subsidy. However, I don’t know how or where to go about claiming it.
The best thing I can advise you to do is pay your full bill for February and until you get more information.
Best of luck to you and the new addition in your family,
Michael Durbin says
COBRA stimulus package to the rescue! At last the calary has arrived! Right?
My COBRA cost is $1200/month, I can’t elect alternative plans because my wife and I both have pre-existing conditions that eliminate us from the lower cost plans.
Problem is, I haven’t heard anyone explain how I go about getting the government to pay 65% of my $1200 monthly cost.
I called my ex-employer whom I mail my payments to and the payroll/benefits person is as much in the dark as I am. I called my insurance company to ask them and they knew even less than my employer.
I have until the end of February to pay for my February COBRA. Since the Stimulus package became law on February 17, 2009, does this mean I can send my employeer 35% of my COBRA cost for February? No one I have spoken to has any idea.
Please help, my daughter-in-law is in labor with my first grandchild as I speak and I could really find better things to do with that extra $780. My son and daughter-in-law don’t even have a washer and dryer yet.
If my insurance company and my ex-employer are clueless who do I turn to for advice they will listen to?
Regards,
New Grandpa
Mike Durbin
Lenexa, KS
valerie says
The Department of Labor’s Employee Benefits Security Administration exists to help benefit plan participants and beneficiaries (in private sector group-sponsored plans)know their rights under the federal law ERISA, and intervene on their behalf with employers and/or plan administrators. Questions about COBRA, pension, or other employee benefits benefits – what will happen with my 401(k)?Should be addressed to them for the definitive answers. Go to their website http://www.dol.gov/ebsa for the regional office in your area or call 866-444-ebsa for publications or to be directed to the office in your area.
Ryan says
Valerie, thank you for the information you provided. I will add this to the article for clarification.
Ryan says
Rebecca: I have not heard of an extension of COBRA benefits beyond 18 months. Obama has yet to take office, so a change of this nature could still be several months away if he makes it.
Rebecca Shaffer says
Has anyone heard of a COBRA extension past 18 months for people not working and who are not disabled? Heard it may be in Obama’s stimulus package.
Please advise.
Jeff Clair says
Ryan, very useful information.
Actually there are lots of insurance plans in the market which suits everyone as per their requirement, but very few people know about them. You have done a great job by providing information about this insurance plan.
All the best for your future ventures!
Jeff Clair
Ryan says
Stephanie,
I think as long as you are in your 60 day window, you can still get your coverage, but I am not sure about retroactive coverage. I think it would depend on the insurer or the details of the situation.
One of the benefits is that with COBRA, your coverage doesn’t lapse, meaning if you have a preexisting condition, you will be able to more easily get insurance through a new provider.
Stephanie says
I was a bit confused about the whole COBRA plan…I heard somewhere that you can retroactively set up COBRA. Have you heard anything like that? What I mean is, you might have, say, 60 days to decide what to do…and you don’t opt into it until after you get hurt or something, and it will be like you had it all along.
Just something I heard, didn’t know what you’d heard about the matter.
Ryan says
Ron,
I was pretty happy with the opportunity to elect coverage right away. It saved me some money because COBRA is expensive!
No break in coverage can be very important – especially for situations like you mentioned.
Ron@TheWisdomJournal says
You were fortunate that your new company allowed you to sign up and get coverage from day one. Too many companies have 90+ day waiting periods to elect medical coverage. All it takes is one split second in a car accident, or the discovery of a “lump,” or a child to require emergency treatment and the lack of insurance can be financially devastating.
Great article and great call to USE your COBRA coverage if you change jobs.
David Carter says
Interesting, I had never even heard of that before. Were you going to get that coverage or will you have a new plan with your new job? I hope you get a mini vacation when you switch jobs. A nice gap of a few days off before you start the new job would be fun (if you can afford it). Good luck at the new job.
Ryan says
Great questions, David, and thanks for wishing me good luck at the new job. I’m excited about the transition.
The job offer I accepted was contingent that I start ASAP, which meant giving my 2 week’s notice right away. So, unfortunately, I won’t have any time between jobs. I could have afforded a small break, especially since I have to sell back my unused vacation time at my current company. (I could have used a few days off too!).
As for COBRA coverage, I won’t need to get it because I will start with my new company before my current coverage lapses. My new company allows me to sign up for the benefits package before my first official day of work and insurance will be effective starting my first day of work. That’s a good deal!