Cobra Continuation Coverage for Short Term Unemployment
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In the U.S., losing your job often means losing your health insurance. But there's hope for coverage if you become unemployed. You may be eligible for the continuation of your health insurance benefits through a federal law known as COBRA — short for the Consolidated Omnibus Budget Reconciliation Act.
COBRA lets you keep your former employer's group health plan for 18 months after your last day at work, and bridges the gap between group health insurance plans for qualified workers, their spouses and their dependent children when their health insurance gets cut off. It's a safety net for families in the midst of crisis, such as unemployment, divorce or the death of a spouse — but that coverage can be expensive.
How does COBRA insurance work? Here's what you need to know about COBRA:
Key Takeaways
- COBRA offers a health insurance bridge until you're eligible for another employer's health insurance.
- COBRA lets you keep your health plan, its benefits and provider network.
- COBRA coverage is expensive and the former employer no longer helps you pay for health care.
- You have other options when you lose your job-based health insurance, including the ACA marketplace.
1. Certain qualifying events trigger 36 months of COBRA coverage for your dependents
Voluntary or involuntary job loss (except in instances of gross misconduct) triggers 18 months of COBRA coverage for you and your dependents, but your spouse and dependent children are entitled to 36 months of continued coverage under certain circumstances:
- You become eligible for Medicare.
- You get divorced or legally separated.
- You die.
Additionally, your dependent child is eligible for 36 months of continued coverage under COBRA when they lose dependent-child status on your health insurance plan.
2. Your former employer can cancel your COBRA coverage if it drops group health insurance coverage completely or goes out of business
When an employer goes out of business or drops its employee health insurance altogether, COBRA law doesn't apply because there is no health plan to continue. Also, if the company reduces its employees under 20, you're no longer eligible to receive group health plan COBRA coverage.
3. If you move outside your COBRA health plan's coverage area, you effectively lose your COBRA benefits
If you leave your job in New York and decide to seek new employment in Texas, you can still enroll in COBRA, but you may not be able to find local doctors on your plan.
Many health insurance plans require that you use their local provider network and your employer isn't required to offer you a plan in your new area.
4. You must pay all of your health insurance premiums under COBRA
Cost is a major factor to consider when buying COBRA coverage. By law, you can be charged 100% of the plan's premiums, plus up to a 2% administrative fee. Employers usually pay more than half of those health insurance premiums when you are their employee.
With COBRA, the former employee has to pay all the premiums. The average employer-sponsored family health plan costs more than $20,000, so COBRA can be expensive.
5. There are more affordable alternatives to COBRA
COBRA was once the only avenue for most Americans to get health insurance after a layoff. Now, people have access to potentially affordable health insurance coverage through the Affordable Care Act marketplace or a short-term health plan.
Losing your job is a qualifying life event that starts a special enrollment period in the ACA marketplace. You may also get added to a spouse's employer's plan during the special enrollment period.
ACA plans also provide subsidies to lower-middle-class Americans. These subsidies help reduce the cost of the ACA plan. When looking for an ACA plan, your state's insurance exchange will take your household into account and provide premium estimates with subsidies in mind.
6. If you're eligible for Social Security disability benefits, you may receive 29 months of COBRA coverage
If the United States Social Security Administration (SSA) determines that you're disabled, you may be entitled to up to 29 months of COBRA if:
- You experience an 18-month qualifying event for COBRA (voluntary or involuntary job loss).
- SSA determines you were disabled either before the COBRA event or within the first 60 days of COBRA continuation coverage.
- Your health plan administrator has a copy of your SSA disability determination within 60 days after the determination is issued and before the end of the initial 18 months of COBRA.
7. Many states have their own "mini-COBRA" laws that grant broader rights in determining COBRA eligibility
Even if you work at a small company that's exempt from federal law, you may still benefit from COBRA. Many states have their own "mini-COBRA" laws that give workers at firms who have between two and 19 employees the right to continue their group health plans.
While COBRA applies to self-funded plans and group health plans offered by employers with 20 or more employees, mini-COBRA laws don't apply to self-funded plans.
8. Under COBRA, you have the same health insurance rights during open enrollment as your former employer's active employees
If your former employer offers an open enrollment period to active employees and you're on COBRA, you — and your COBRA-enrolled spouse and dependent children — have the right to switch health insurance plans at that time.
You may also add new dependents if your employer offers this option to active employees. Newborns can be added at any time during the year as long as they are added within 30 days of birth.
9. Because COBRA is a federal law, the U.S. Department of Labor has jurisdiction over COBRA grievances
Contact the U.S. Department of Labor, the agency that administers COBRA, if you believe your employer is in violation of COBRA law. The toll-free telephone number is (866) 444-EBSA (3272). Or see COBRA information on the Employee Benefits Security Administration Web site.
10. Even if you enroll in COBRA on the last day that you are eligible, your coverage is retroactive to the date you lost your employer-sponsored health plan
How long do you have to sign up for COBRA? COBRA beneficiaries have 60 days to decide whether they want COBRA coverage. If you enroll in COBRA before the 60 days are up, your coverage is then retroactive, as long as you pay the retroactive premiums.
This means that if you incur medical bills during your election period, you can retroactively — and legally — elect COBRA and have those bills covered.
COBRA is expensive, but it also provides you peace of mind if you ever lose your job. Whether going with COBRA is the right choice for you depends on what you want from your health plan and how much you're willing to spend.
Final thoughts
COBRA is a great option for those who need to maintain their health insurance, COBRA insurance coverage can last up to 18 months, but you'll need to pay the full premium, plus a 2% administrative fee.
There are other less-expensive options than COBRA, such as buying a health plan through ACA marketplace or short-term health insurance.
Frequently asked questions
Is COBRA retroactive?
Yes, COBRA is retroactive. If you originally choose to not opt-in for COBRA insurance, you can later opt in if necessary. However, retroactive benefits mean that if you opt in for COBRA coverage, the start date is considered the day after you lost your employer's insurance. Because of this, you would need to pay back any premiums for the months before you opted in for coverage.
What is COBRA retroactive reimbursement?
If you enroll in COBRA after paying for some medical expenses on your own, you may be reimbursed by your insurer. You will need to submit these claims to your insurer and they will decide if your expenses will be reimbursed.
Are there any COBRA loopholes or traps?
One small trap of COBRA is that if you purchase coverage later, you have to pay back the premiums for all the months you could have had COBRA but did not. Additionally, if you become seriously injured or ill, you may be locked into expensive COBRA coverage longer than anticipated and have to pay higher than normal premiums for health insurance.
How long can I use COBRA?
You can typically have COBRA coverage for 18 months. There are exceptions, though.
Your dependents may be able to keep COBRA coverage for 36 months if they became eligible for COBRA because you got a Medicare plan, you got divorced or legally separated or you die. Dependent children can also get the extended coverage after they turn 26 and lose your heatlh insurance.
Can I get COBRA if my husband retires?
Yes, you can get COBRA coverage for 36 months if you lose health insurance coverage because your spouse retires.
How do I apply for COBRA after layoff?
Your former employer will notify your health insurance company when you lose coverage.
A short time later, you should receive information about your COBRA coverage option and how to sign up for COBRA with your health insurance company.
How much is COBRA monthly?
COBRA coverage premiums are very expensive. With COBRA, you're able to keep your former employer's health insurance temporarily — but they no longer will chip in money to help pay for premiums. Instead, you have to pay for the whole COBRA coverage premium. The average employer-sponsored family health plan costs more than $20,000, so you can easily pay $2,000 a month or more for a COBRA premium for a family. The good news is you keep the same health benefits and health care provider network, but those come at a cost.
Who qualifies for free COBRA insurance?
The American Rescue Plan signed into law in early 2021 gave free COBRA coverage to anyone who lost health insurance over the past 18 months because of a job loss or having their hours reduced. The federal government subsidized the COBRA premiums for those who recently lost their health insurance. However, that benefit ends on Sept. 30. After Sept. 30, everyone will have to pay standard COBRA premiums.
* Les Masterson contributed to this s tory*
Source: https://www.insure.com/health-insurance/cobra-tips.html
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