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Confusion around COBRA

Q: I was terminated in March of 2010. I am not sure how COBRA works. Do I have to contact my former company's benefits office to enroll? How do I know if I am eligible? I hear the rates are horrible. How can an unemployed person pay COBRA if they don't have an income?

A: I am sorry that you were terminated and are confused about Consolidated Omnibus Budget Reconciliation Act (COBRA) and your benefits options. Most employers are required to offer COBRA to employees upon termination or resignation. There may be some exceptions. If an employee is terminated for "gross misconduct," then the former employee can be denied COBRA rights. Generally however, employees that were enrolled in an employer's plan(s) have specific rights to continue those benefits for both themselves and their qualified beneficiaries.

COBRA only applies to companies that employ 20 or more employees. In Massachusetts (and many other states), there are "Mini-COBRA" laws. Mini-COBRA provides the continuation of health benefits to employees of small businesses (2-19 employees). Mini-COBRA laws are similar to COBRA but there are variations between states. For more on Massachusetts Mini-COBRA laws, visit www.mass.gov/doi.

If your former employer is required to comply with COBRA and you are eligible for COBRA, you should have been mailed information regarding your COBRA rights. You should have had the opportunity to review the information carefully. If you wish to continue your benefits, you are required to take action. You may want to contact your former employer to ensure that they have your current mailing address.

The Department of Labor provides both a general overview of COBRA as well as Frequently Asked Questions (FAQs) on their website. COBRA is a bit tricky but it a worthwhile option for many. You can learn more by visiting http://www.dol.gov/dol/topic/health-plans/cobra.htm.

COBRA rates can be expensive. Your former employer can charge you 102% of the premiums. While you were actively employed, your employer may have been contributing a significant portion to the costs of your medical and/or dental benefits. Your former employer will likely discontinue their portion of contributions so the financial burden can become a challenge. You may want to evaluate other options if they are available to you. You may want to consider a spouse or partner's benefits plans at this time. These may be less expensive options than purchasing benefits through COBRA. Additionally, COBRA is a valuable benefit for many who have lost coverage, but it is temporary coverage. The maximum period of time that you may participate in COBRA benefits is usually 18 months. Extensions are available but certain conditions must be met.

You also may want to research The American Recovery and Reinvestment Act of 2009 (ARRA), as amended on March 2, 2010 by the Temporary Extension Act (TEA). In short, these Acts offer certain individuals a substantially reduced COBRA rate if the eligible employee was involuntarily terminated between September 1, 2008 and March 31, 2010. Certain conditions must be met for a former employee to be eligible. Your employer is required to provide information about the subsidy to you if you are an eligible individual. For more information, visit www.dol.gov/ebsa/cobra.html.

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