COBRA, or the Consolidated Omnibus Budget Reconciliation Act of 1985, is a statute that guarantees employees and their families continued insurance coverage for a specified amount of time after termination of group health insurance coverage with the company.
In layman’s terms, to be covered by COBRA means that after a person has lost his/her job, or experienced another qualifying event, the company’s group health insurance will continue to be offered to the employee and family until they can obtain alternative health insurance or until the COBRA benefits expire.
Though most people associate COBRA benefits with loss of a job, there are several qualifying events the make a person/family eligible for COBRA: termination from job (as long as it is not “gross misconduct”); voluntary resignation from a job or reduction of hours ensure an employee and family 18 months of COBRA coverage. * The COBRA coverage may be extended to the spouse and dependent children of an employee for 36 months in case of: divorce/legal separation; employee becomes entitled to Medicare; death of employee or loss of dependent child status (available to child only).
COBRA health insurance coverage is advantageous for several reasons, the most obvious, of course, is that a family can continue to have health insurance, even if the employee has lost his/her eligibility for the company health insurance. Many families also use the COBRA coverage to continue health insurance coverage if they have been, or will be, denied new health insurance coverage due to a pre-existing condition of one or several family members.
The only overwhelming drawback to COBRA is the cost. Like individual and small business health insurance, the cost is almost prohibitive and may cause many families to consider going without health coverage until new heath insurance may be obtained. (This may cause a different set of problems for the family due to laws pertaining to gaps in coverage of 63 days or more. **) Individuals or families who are eligible for COBRA coverage will pay 102% of the insurance premiums until coverage is terminated. Most companies pay part or even all health insurance premiums, so 100% of the premium plus an extra 2% for administrative fees can come as a shock to the employee and their wallet.
COBRA, though complicated process with many detailed specifications, has saved many families from financial ruin at an already financially critical time of life. If you require more details about the COBRA Act of 1985, call your insurance company, your state insurance department or look up more information on-line.
* There are several groups that are exempt from the COBRA act of 1985 including: employees in Washington D.C.; federal employees; church organizations providing group health insurance to an assemblage and companies who employ less than 20 people. Due to the necessity of COBRA, many states have enacted a “Mini-COBRA” act that ensures healthcare coverage in case of the previously mentioned exemptions. To find out if your state has a “Mini-COBRA” statute, call you state insurance department.
** HIPAA The Health Insurance Portability and Accountability Act ensures people who have had no gaps in insurance coverage ( 63 days or more) cannot be denied coverage even due to pre existing conditions.