One of the scariest things about losing a job, transferring to a new job, or going into business for yourself is wondering what will happen to my health insurance. If you were insured through your previous employer, it can be a little overwhelming thinking about what you will do about your health care needs. Fortunately, there is COBRA to help you along the way. COBRA health insurance has some drawbacks, but it can help you stay covered.
What is COBRA Health Insurance?
COBRA health insurance is a law that allows an employee (or a dependent) who loses health insurance due to a qualifying event to stay covered through the group plan of their employer. The coverage will be identical to what the individual had before the loss of coverage.
What are the Qualifying Events?
COBRA health insurance is available if the loss of coverage is due to any of the following:
- Voluntary or involuntary termination of employment due to any reason other than gross misconduct
- Reduction in hours of employment, thereby making the employee ineligible for coverage under their group plan
- If the employee becomes eligible for Medicare, dependents become eligible for COBRA
- Divorce or legal separation allows dependents to become eligible for COBRA
- Death of the covered employee allows dependents to become eligible for COBRA
- If a child loses dependent child status, the child become eligible for COBRA
How Long Is the Enrollment Period
An individual must be enrolled in COBRA by the later of:
- 60 days from the loss of coverage, or
- The date the COBRA election notice is provided by the plan administrator
How Long Does COBRA last?
If the loss of coverage is due to employment termination or a reduction of hours, COBRA health insurance is available for 18 months from the loss of coverage. If the loss of coverage is due to any of the following, then COBRA is available to dependents for 36 months:
- Employee becoming eligible for Medicare (COBRA is available for 36 months from Medicare eligibility date)
- Divorce or legal separation
- Death of employee
- Loss of child status
What Does COBRA Cost?
A downside of COBRA is that the subscriber must pay the entire premium of the plan (plus 2% generally for administration fees). This can come as a shock to some people who are used to just paying a percentage of the premium through their employer’s plan. For example, if the full premium is $500, but the employer just requires a payment of $100, then the former employee will have his or her monthly insurance cost increased by $410 ($500 + 2% = $510) – $100 = $410.
Is COBRA Only Available for Medical Insurance?
An individual can sign up for COBRA for medical, dental, and vision coverage, as long as they were enrolled in these plans before the loss of coverage.
Are All Employers Required to Offer COBRA Coverage?
No, COBRA is only required for employers with at least 20 employees.
Should a Young Person Apply for COBRA Health Insurance Extension?
This is a tricky question, and it depends on the new health insurance plans available, the cost of the plans, and the health care needs of the individual. Under the Patient Protection and Affordable Care Act (PPACA), insurance companies can no longer deny coverage for pre-existing conditions. Therefore, it is not necessary to stay on COBRA because you are afraid of not being able to get coverage elsewhere.
However, if you look around and find that other coverage options are not as price-friendly, or do not cover the same level of benefits, it could be worth it to stay on COBRA.
But if you move to a new employer who offers health insurance, it will almost always be beneficial to switch to their plan since they will most likely subsidize a portion of the health insurance cost.
Remember, though, that there is a limit to how long you can keep the COBRA health insurance extension, so sooner or later you will have to find a new plan in which to enroll.