What is COBRA Health Insurance?
COBRA is federal legislation that gives a worker the right to access his or her employer's (or former employer's) health coverage for a period of time following a job loss, termination, or reduction in hours. COBRA gives the worker the right to be covered by the exact same health plan that the company offers its employees for a period of as much as 18 months (36 months in some special cases).
COBRA is named for the legislation that created this right, the Consolidated Omnibus Budget Reconciliation Act. Enough of the boring stuff - here is what you need to know. COBRA will allow you to continue your health insurance for a period of time following your job status change, provided you worked for an employer of more than 20 employees and they offered health coverage. A few of the situations which could create the option for COBRA coverage include:
- Job loss
- Termination from job
- Reduction in hours worked, causing worker to lose health benefits
- Divorce from a covered employee (spouse may continue to access insurance benefits)
- Death of covered employee
- Any of the above situations when a dependent loses coverage due to a worker losing coverage (dependent can also qualify for COBRA)
If you are an individual who could qualify for COBRA, there are a few things you should know about it.
You Pay For COBRA - all of it. COBRA is intended to give you continuation of the health insurance that you had before, but it does not require your former employer to pay for it. It is not a benefit - it is simply a way for you to continue to access the insurance you had before, at the group rate at which employer was purchasing it. You may have paid $200 a month for health insurance before, and your employer may have paid the other $400 of the $600 policy as part of your benefit package. This is a pretty common scenario. In this example under COBRA, you would pay the full $600 a month to keep the insurance (actually, federal law allows for the administrator to charge 102% of the premium, or in this case $612, to cover administrative costs).
COBRA Can Be Retroactive. You have 60 days from the date of the "event" (day you lost your job, for example) to decide if you want COBRA. Then, once you decide, you have 45 days to make the premium payment. So if you were laid off on March 1, decided not to do COBRA, and on April 10 you suffer a severe injury, you could retroactively activate COBRA by paying the premiums for March and April.
Your Provider May Have An Interest in Getting You on COBRA. Hospitals and physicians have been known to assist patients in getting their COBRA eligibility retroactively, especially if it means that a large medical bill would be paid by the insurance. Providers would rather get payment from an insurance company than from a patient - they are likely to get paid more and get paid faster. If you are within 60 days of job loss and facing a large medical bill, work with your provider on getting COBRA.
COBRA Is Not Always Cheaper Than Other Insurance. Especially if you were working for a small employer who didn't get good group rates, you might be better off going to the private insurance market and looking for a basic High Deductible Health Plan (HDHP) rather than accepting your employer's COBRA coverage. If an HDHP can be had for $450 per month, but your employer's COBRA will run $700 per month, think long and hard about if the benefits that come with the COBRA are worth the extra costs.