How COBRA Health Insurance Works
COBRA is a type of health insurance that allows people to continue paying for their most recent employer-based group health plan when that plan ends due to a qualifying event.
The Federal COBRA Act
COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that allows certain individuals to continue their employer-sponsored health insurance coverage after they leave their job or experience a qualifying life event, such as a divorce or the death of a spouse.
COBRA is not an insurance company, but rather a law that requires employers to offer their former employees the option to temporarily continue their health insurance coverage at their own expense. It is important to note that COBRA coverage is not automatic and individuals must elect to continue their coverage within a certain timeframe in order to be eligible.
What Is COBRA, Then?
COBRA insurance is a term most people are familiar with. It refers to paying out-of-pocket for group health insurance coverage that was in effect when an employee lost his or her job or when a family member loses access to the group plan.
When starting on a COBRA plan, you are responsible for paying the entire premium, including the portion the employer was subsidizing.
COBRA Health Insurance Eligibility
If you experience a qualifying event such as job loss or a change in your family circumstances, your former employer is required to offer you the opportunity to continue your group health insurance coverage through a special open enrollment period.
As long as you were enrolled in a qualified group health plan for at least one day, you are eligible to keep your insurance through this special enrollment period.
Federal COBRA Oversight
The two federal government agencies that oversee employer execution of COBRA are the Department of Labor (DOL) and the Department of Health and Human Services (HHS). The DOL is responsible for enforcing the provisions of COBRA that pertain to employer and employee rights and responsibilities, while the HHS is responsible for ensuring that COBRA coverage meets the standards set forth in the Affordable Care Act.
Rules Of COBRA Insurance
In simple terms, this is how you obtain COBRA insurance:
- Your employer’s work health insurance ended due to a qualifying event
- Quit your job
- Work hours were reduced
- Separation from plan main beneficiary
- Within 45 days of the qualifying event, the employer sends you an election notice to restart your workplace insurance
- Within 60 days of the election notice, you may choose to enroll back into your health plan where the coverage
- Your copays, coinsurance, deductibles, out-of-pocket expenses and insurance cards for the year stay the same
- You have 45 days to make your first COBRA premium payment
- The coverage is retroactive and any medical expenses you incur before the COBRA plan starts may be submitted for reimbursement
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How Much Is COBRA?
Since COBRA is identical to the work health insurance plan that you had before, you will be responsible for paying the entire premium, which includes the portion that your employer used to cover. The typical cost of this traditional health insurance plan is around $438 per month per person across the United States.
When Does COBRA Coverage Begin?
After all of the premiums are paid, COBRA coverage will begin on the same day as the qualifying event.
The duration of the COBRA coverage period will vary depending on the type of event that caused the qualified beneficiary to lose their group health plan coverage.
Employers Are Required To Provide COBRA Continuation
The U.S. Department of Labor oversees the federal COBRA law and requires all companies with 20 or more full-time employees to provide continued access to the same group health plan coverage to workers if that health insurance would stop.
This means if you lose your work insurance, you may keep the same coverage you had. The employer is responsible for notifying you of COBRA eligibility in a timely manner.
COBRA Is The Same Insurance You Had
By using your COBRA right, you simply have the same employer-sponsored health plan you just had before you lost it.
When you elect to stay on your employer’s health insurance, you keep your same doctors, copays and prescription coverage. If you had dental and vision coverage previously, then your COBRA will have dental and vision .
COBRA is Available For 18 or 36 Months
The good news for many people is that a COBRA health plan from their former employer satisfies the individual ACA mandate while protecting their family’s health and well-being as they previously had. COBRA insurance coverage may last up to 18 months.
Additionally, COBRA continuing health coverage is available to former spouses after divorce, retirees before they begin Medicare and children that lose their dependent status.
You May Cancel COBRA At Any Time
To cancel COBRA coverage, you will need to let your plan administrator know.
Health Insurance After Quitting Your Job
If your employer is required to allow you access to their group health insurance, then it doesn’t matter how your job ended. Your COBRA rights allow you the option of keeping your workplace insurance if you quit your job or the company downsized.
Should You Choose A COBRA Plan?
If you have had recent or ongoing health problems, often times its best to stay on your former employer’s group health plan. Learn more about when to choose COBRA or look for an alternative for continued health insurance.
Some States Have Mini-COBRA
The federal COBRA act is in force for all companies with 20 or less employees. Many states have their own laws regarding continuation of workplace insurance. These “Mini-COBRA” laws may allow works more time to continue the insurance after the federal time period has been exhausted. You’ll have to check if your state has additional insurance laws.
Affordable COBRA Alternatives
If the cost of COBRA insurance is too much, you may want to consider a short-term medical plan.
If you are in reasonably good health and without pre-existing medical conditions, there are affordable temporary health insurance plans options available.
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