Health Insurance Articles
What Is COBRA?
2009-10-06
Congress enacted the Consolidated Omnibus Budget Reconciliation Act (COBRA) in 1986. Its purpose is to provide continuing healthcare at group health insurance rates for employees who lose their coverage and qualify for benefits under the statute. Coverage will be identical to the coverage offered to like employees under the company's plan. Three criteria must be met to be eligible for COBRA benefits. The health coverage received will generally be more expensive than that received through a company plan. It will, however, be less expensive than an individual plan purchased on the open market. Benefits under the plan continue for 18 months although they may be extended under some circumstances.
COBRA benefits are available to employees of companies which employ more than 20 people and have company health insurance plans. In order to qualify for COBRA, an employee must have been part of the company plan and the plan must still be in existence. The employee, the employee's spouse, and dependents are considered qualified beneficiaries and health coverage may be chosen for any or all of them. In certain cases, retired employees, their spouses and dependents may also be eligible for health insurance through COBRA. Independent contractors and other non-standard employees may also be covered. All employees no matter what their status should inquire about COBRA if they become ineligible for coverage under their company's healthcare plan.
A "qualifying event" must occur to trigger COBRA healthcare benefits. The event will differ according to the beneficiary involved. For instance, for the employee, the trigger would be loss of employment either by choice or by termination other than for gross misconduct. A reduction in hours worked below that required for health insurance would also qualify the employee for COBRA. For an employee's spouse, the trigger might be the death of the employee. For an employee's dependents, the qualifying event might be reaching a birthday that ends dependent status. An employee who becomes eligible for Medicare can enroll his/her dependents in a COBRA health insurance plan.
The amount of time allowed to apply for COBRA differs amongst companies according to the companies' health insurance plans and the companies' specific make-up. In all cases, the affected parties should receive notice of their eligibility to file for benefits within 14 days after the administrator of the company's health insurance plan is notified of a qualifying event. The application window is limited; therefore, qualifying beneficiaries should apply as soon as possible after the qualifying event takes place. It may also be wise to inquire about individual healthcare coverage; rarely individual plans may be less expensive than coverage under COBRA. Consult your healthcare plan administrator for the specifics of COBRA coverage provided by your company.
