Using COBRA for Health and Medical Insurance Coverage

COBRA Extends an Employee's Insurance Coverage

Receptionist taking patients insurance card in dentists office
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The Consolidated Omnibus Budget Reconciliation Act, also known as COBRA, requires employers to continue to offer health or medical insurance coverage to employees or their families after certain qualifying events.

For the employee, those qualifying events include being laid off, or losing his or her job. Spouses or children may continue coverage after the retirement, divorce or death of the employee.

There are additional COBRA qualifications and stipulations for employers. For example, COBRA only applies to employers who have 20 or more employees. They may be private sector, employee organizations or state or local government employers.

Find more information about employer qualifications and rules on the US Department of Labor's COBRA website.

What Employees Need to Know About COBRA

Your Coverage Under COBRA:

If you take advantage of COBRA, the coverage plan you will have is the one you had before you were laid off. The plan itself won't change until the open enrollment period, at which time you may make a change if you will stay with the COBRA plan.

Cost of COBRA Coverage:

Employers are allowed to charge you, their former employee, 102% of their cost of the insurance. Of course, 100% covers the employer's cost to insure you. The extra 2% covers any administrative costs the employer must absorb to take care of the paperwork.

Employees are often shocked at what COBRA coverage will cost them. If you paid for only part of your health insurance coverage before you lost your job or got laid off, or if your employer has paid the entire cost of coverage to that point, then it will seem very expensive to you.

Unfortunately, as expensive as COBRA coverage may seem, it will probably still cost you less than individual health insurance.

A smart patient will compare the costs and the coverage to be sure he is comparing apples to apples.

Note: The economic stimulus plan provides a subsidy to help Americans who lost their jobs continue to pay for COBRA coverage. See notes below.

Length of COBRA Coverage

In most cases, a former employee or family member may keep COBRA health insurance coverage for up to 18 months after the last date of employment.

If the person covered through COBRA becomes disabled, then benefits may be extended for up to 11 more months. Premiums will increase for that extension.

How to Apply for COBRA Coverage

When you are ready to leave your job, your employer must give you COBRA information which will include the steps you'll need to take to extend your coverage after you leave your job.

If you have not received that information within 14 days, contact your employer's HR department and ask them to provide it to you.

How to Prepare for the End of Your COBRA Coverage

While you are still covered under COBRA, you'll want to monitor pricing for a new health insurance plan you can shift to once your COBRA coverage ends.

Here are some resources to help you do that:

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