Health Insurance Articles
How Cobra Affects Your Health Insurance Coverage And Rates
2010-02-07
Introduced in 1985, the Consolidated Omnibus Budget Reconciliation Act or COBRA allows for employees who have undergone a "qualifying event" to continue to receive employer group health insurance coverage. These events can include termination from the company or simply a reduction in hours. This act also applies to spouses and dependent children of employees after a divorce or even the death of the employee themselves.
COBRA coverage must be offered by employers who have 20 or more employees, a number which includes both full and part-time workers. It allows for workers or their qualified dependents to continue to receive the same level of health insurance as before the "qualifying event" occurred. So, if an employee was terminated (for a reason other than "gross misconduct"), they could elect to use the COBRA coverage if they did not have another job lined up that would provide health care, but still needed benefits. Similarly, a spouse whose partner was an employee of the company and passed away would be entitled to continue to receive benefits under COBRA. In order to be eligible for COBRA, an employee or dependent must have gone through a qualifying event, be covered by an employer who is required to provide COBRA and have been covered by the group health care plan the day before the qualifying event happened.
Once on COBRA coverage, the employee becomes responsible for any premiums associated to the health care plan. This health insurance rate cannot exceed 102% of the actual premium paid by the employer per month, and is offered for 18 months. Employees with long-term disabilities may be able to extend this period a further 11 months, but the premium price can be increased to 150%. COBRA payments typically come with a 30 day grace period, but coverage can be suspended for non-payment. If an employee finds another job with health insurance or wishes to remove themselves from COBRA, they can do so immediately. COBRA coverage will terminate if the employer goes out of business. A qualified beneficiary must notify the administrator of the health care plan within 60 days of a qualifying event, and they have the same amount of time to decide if they wish to acquire coverage under COBRA.
While COBRA means that the premiums previously paid by the employer are downloaded onto the former employee or spouse, it can be an excellent way to maintain benefits in a situation where continuing care is needed or another job may not be forthcoming. Allowing for employees, their spouses and children to all elect coverage under COBRA makes it a viable option for those who find themselves suddenly in need of health care.
