When I resigned my job just over a week ago, I met with my HR rep at my office to go over a few things before my final day. One of the topics we covered was COBRA Insurance, or COBRA continuation coverage. COBRA stands for Consolidated Omnibus Budget Reconciliation Act of 1985, and is a federal law which helps employees maintain health care coverage when they would otherwise lose it from a “qualifying life event,” including resigning from a job or filing for unemployment.
What is COBRA Insurance?
Basically, COBRA health insurance coverage guarantees employees the right to keep their group health care coverage for up to 18 months when they would otherwise lose it after leaving their job. COBRA generally covers employees who resign or are terminated for any reason other than “gross misconduct.”
However, there is one big difference. While employees are guaranteed the right to the same health care coverage they previously had, they are required to pay for all of it out of their own pocket. Their former employer is not required to subsidize the payments. Employers often cover a substantial portion of health insurance premiums, so COBRA coverage can be expensive.
COBRA Coverage can also be made available to an employee’s family members, sometimes for up to 36 months. COBRA is not available for individual health care plans that are purchased outside of a group plan through an employer or an association. If you lose individual health care coverage, there are no COBRA laws that require an extension.
How is COBRA Coverage Provided?
You must contact your human resources department and inform them when you have a qualifying life event, generally within 30 or 60 days of the event, depending on the type of event. Once your HR department has been made aware of the life event, they are required to offer qualified beneficiaries COBRA coverage. Each qualified beneficiary has the independent right to elect or decline coverage. From there, payments will be arranged through your company or their group health care provider.
When does COBRA Coverage end?
COBRA Coverage can extend up to 18 months for the employee, and up to 36 months under certain conditions for a spouse or dependents. There are certain conditions that will cause COBRA coverage to end, including:
- Reaching the last day of COBRA coverage (after 18-36 months)
- The employer ceases to offer a group health care plan
- The employer goes out of business
- The beneficiary obtains coverage elsewhere
- The beneficiary doesn’t pay the premiums
- The beneficiary is entitled to receive Medicare benefits
Should you elect for COBRA Coverage?
This is a very personal decision. While COBRA can be very expensive (sometimes prohibitively expensive), it will allow you to keep the same group health care coverage as you had while you were with your employer. COBRA also extends to spouses and dependents in events such as a divorce or the death of an employed spouse. This may be their only way to maintain coverage.
In my opinion, health care insurance is essential. I would at least consider COBRA coverage until you can investigate other options. Before applying for COBRA coverage, you should at least investigate individual health insurance, which will probably be a cheaper option (though you may not be eligible if you have a preexisting condition). You can find search for insurance rates on this site, or visit eHealthInsurance.com for multiple quotes.
Disclaimer: This article is intended to serve as a primer for COBRA coverage. There are many situations that can affect an individual’s eligibility. Please consult with your HR department or another professional for more detailed information. You can also visit the Department of Labor website for specific questions, or for information about the regional office in your area. You may also call 866-444-ebsa for publications or to be directed to the office in your area.