If you’ve ever been laid off from a job, you’re probably very well acquainted with the health insurance program, COBRA. Even people that have never had it may have heard of it, and may be curious as to what it actually entails. The following information may help.
COBRA stands for the “Consolidated Omnibus Budget Reconciliation Act.” This was a law that was passed by the US Congress in 1985. The law was created to allow people to hold onto their health insurance for up to a year and a half after leaving a job. One of the risks that people face with leaving jobs is coasting for a period of time without health insurance. For a young person in good health and with no dependents, it may not seem like a big deal. He may decide to take the risk until he gets new insurance. For someone with a family, it’s a huge risk. There are many stories told about families who have had financially devastating medical emergencies while temporarily uninsured. Fear of this very thing happening may prevent someone from seeking better employment. With COBRA, the family will receive vital health coverage until they obtain it from the employee’s new employment.
In order to qualify for COBRA, several requirements have to be met. The first is that your group health plan has to have been provided by a “qualifying employer." A qualifying employer is one that offers a group health plan and has at least 20 employees. At least 10 of those employees need to be enrolled in that health plan.
The second requirement is that that you must be a “qualifying beneficiary. This just means that you, the employee, work for a qualifying employer, as explained above. It also refers to your spouse or partner (in some cases), and your dependent children. Occasionally, the definition of “qualifying beneficiary” also includes independent contractors hired by a company, but you’d have to check with your company to see if that applies to you.
The third requirement for receiving COBRA benefits is that there be a “qualifying event.” Who the “beneficiary” is determines the definition of “qualifying event.” If you’re talking about the employee, a qualifying event could mean being laid off due to lack of work, or if the assignment is over. The layoff can’t be due to gross misconduct, so if you helped yourself to company coffers, you’re out of luck! The qualify event due to job loss extends to your spouse, partner and dependents as well, but they can also qualify in other ways. If you’ve reached Medicare eligibility but your family still depends on you for health insurance, this would be a qualifying event for them. They’d also be eligible if you passed away. Children could also qualify once they lose dependent child status, which is usually when the child turns 18.
Now for the bad news. COBRA is not free health care – it’s not like your company will continue paying your insurance even though you don’t work there anymore. The good news is that you’ll still have your exact same health insurance at the same premium that your company was paying. The bad news is that it will be the same premium your company was paying...yes, it’s both good and bad. Premiums that a company pays are usually higher than premiums an employee would pay if he bought independent health insurance. While that’s not ideal, it’s still better than risking it with a new insurance company that may require health exams to screen for pre-existing conditions. Signing up for Cobra means that there will be no break in your and your family’s insurance coverage, and that things will remain the same health coverage-wise for the next 18 months. In times of instability, that gives infinite peace of mind.