How does COBRA coverage work and is it a good deal?
What can you tell me about health insurance provided under COBRA? If I leave my job, am I entitled to coverage for 18 months or 36 months? Also, is COBRA a good deal?
The Consolidated Omnibus Reconciliation Act (COBRA) is a federal law that gives you (and your family) the right to continue to keep group health insurance benefits for a mandated period of time. Before COBRA was enacted, when employees left their jobs, the employee and their family lost health insurance coverage almost immediately. Oftentimes, families were without coverage for just a period of weeks or months while the primary wage earner was between jobs but that was often when disaster would strike. COBRA was created to address this situation and it gives employees (and their families) the chance to buy health insurance through the employer even after the employee no longer works for the company.
A qualifying event is the event that renders an employee (or their dependents) eligible for COBRA benefits. Generally speaking, there are 4 "categories" of qualifying events:
1) An employee dies.
In this situation, the employee's spouse and dependent children would qualify for coverage for 36 months.
2) An employee is terminated, laid off, takes a leave of absence, or has their working hours reduced.
In this situation, the employee, the employee's spouse and the employee's dependent children are eligible for coverage for 18 months.
3) An employee divorces or legally separates from their spouse.
In this situation, the employee's spouse and dependent children are eligible for coverage for 36 months.
4) An employee's dependent child is no longer considered a dependent under the group health plan.
In this situation, the employee's child is eligible for coverage for 36 month.
If you lose your job, it is very important that you sign up for COBRA coverage because it is generally the least expensive and most comprehensive coverage you will find. The premium for COBRA coverage is just 102% of the cost of the group health coverage -- usually much less than you would pay for individual health coverage.
If you are terminated by your employer, you will receive a letter notifying you of your COBRA rights and then you will have 60 days to elect coverage. No matter when you enroll, your coverage is retroactive to the date you lost your employer provided coverage. Remember, you must elect the coverage in writing and you must be diligent about paying the premiums. Don't miss even one payment because you could end up losing your coverage.
