Everything you need to know about COBRA health insurance
Regardless of employment status, Americans across the country are constantly navigating through their health insurance options, to make sure they have coverage that best suits their healthcare needs. And the issue can become all the more pressing when a person’s employment status changes — whether you leave a job voluntarily, are terminated, or even dealing with a change in work hours, the status of your health insurance benefits could be in flux. For many people in the United States, these kinds of life events are when they first learn about something called COBRA health insurance, a form of coverage that lets you keep the insurance you have even if your job status changes.
What is COBRA health insurance?
If you have, and then lose, job-based health insurance through your employer, you may be offered COBRA coverage. To qualify for COBRA continuation, you need to experience a “qualifying event.” Losing your health insurance due to a job loss, whether voluntary or involuntary, counts.There are also other instances where you may qualify for COBRA health insurance. These range from losing coverage as a result of the death of a covered spouse, divorce or legal separation that results in the now-ex spouse losing benefits, a child’s loss of dependent status, a reduction of hours as a result of everything from a slowdown in business operations to a layoff or strike to medical leave. However, the list of qualifying events excludes losing your job due to “gross misconduct”.
In short, if you find yourself facing any of these qualifying events, you might be able to keep the insurance you had by paying 100% of the premiums associated with it (including the part your employer used to pay for you) plus a small administrative fee. For many people, COBRA health insurance is a great way to ensure that you have the coverage you need, regardless of your current employment status. In most cases, federal law will allow you to pay for and be covered by COBRA health insurance for 18 months from the time you lose your employer-provided insurance. However, for some qualifying events (namely, death of a covered spouse or divorce from a covered spouse) you might be able to pay to keep the insurance you once had for up to 36 months.
What does COBRA stand for?
COBRA is an acronym that comes from the Consolidated Omnibus Budget Reconciliation Act, signed into law by President Ronald Reagan in 1985. Among other things, this law made it illegal for certain kinds of employers to take specific tax deductions if they weren’t also offering the option of continued coverage under its employee health insurance plan.
In other words, you can thank this law, and its notable name, for ensuring that you might have the option to pay on your own for and keep your health insurance after leaving or losing a job.
Who qualifies for COBRA coverage?
Under the law that it gets its name from, most types of employers are required to offer continued health insurance coverage to “qualified beneficiaries”. This is the official term used to describe employees, their spouses, former spouses, and any dependent children who might who’s loss of coverage is due to specific kinds of qualifying events, like leaving or losing a job, death of a covered employee, or divorce.
COBRA covers group health plans sponsored by an employer (private-sector or state/local government) that employed at least 20 employees on more than 50 percent of its typical business days in the previous calendar year. Full- and part-time employees all go towards the ultimate headcount for determining what kind of employers are covered by COBRA benefits, with a certain formula applied for tallying part-time employees.
A dependent child who have been covered by their parents’ health insurance coverage are also eligible for COBRA continuation coverage. This happens after they “age-out” or lose their dependent status at the age of 26.
How much does COBRA health insurance cost?
While a great option for a lot of people facing the end of their current insurance coverage, there is a catch — COBRA will cost you. Without your employer contributing to the cost of the monthly premiums associated with this health insurance plan, premiums can be steep. Before your employer was likely contributing a significant amount towards your monthly health insurance premiums. Now you will be responsible for paying those premiums in full, all out-of-pocket — which could translate into a real change in your monthly insurance cost.
Do I have to get COBRA?
It’s always good to know your coverage options — and if you lose your employer-based health coverage, you don’t have to elect COBRA.
As of 2019, federal law no longer requires that you pay a fee or fine (sometimes referred to as the “individual mandate”) if you can afford health insurance but choose not to buy it. However, having health insurance ensures that you are protected from unexpected — and often staggeringly expensive — medical costs. Not to mention that as a result of the Affordable Care Act (ACA), preventive services are covered at no cost when you have an ACA-compliant plan.
So while you don’t have to get COBRA health insurance, and may want to investigate the non-COBRA insurance options you might have, it’s best to stay insured. And when you’re considering your health insurance options, it’s always best to look for an ACA-compliant plan that covers a number of essential health benefits, ensures that you are granted coverage regardless of pre-existing conditions and places certain parameters around costs, helping you stay healthy, physically and financially.
What are some COBRA alternatives?
If you lose your employer-sponsored health insurance for any number of reasons and want to make sure you stay insured but don’t want to do so through COBRA, you do have some options.
Loss of health insurance through your former employer means you are eligible for a Special Enrollment Period to buy your own insurance through the Health Insurance Marketplace in your state. With a Special Enrollment, you can shop for coverage even if you’re outside of the standard Open Enrollment Period. During this Special Enrollment Period, you’ll have 60 days from the time your employer-provided benefits end to enroll in a health plan. Any insurance plan bought through the individual Marketplace will ensure you have coverage for essential health benefits. Plus it will meet the Affordable Care Act’s requirements on limits on consumer spending, meaning that your deductibles, copayments, and out-of-pocket maximums can’t exceed a certain amount in a given year. Depending on your financial status and the kind of plan you want, a Marketplace plan might be significantly cheaper than COBRA health insurance — especially if you qualify for a premium tax credit to further reduce your premium costs.
Searching for a Marketplace plan will also show you if you or anyone in your family qualifies for Medicaid services or CHIP (Children’s Health Insurance Plan) based on your income. You will also find out if you qualify for a subsidy to lower the costs of the plan you purchase through the Marketplace. And if you’re over 65, you would be eligible for Medicare, a form of federal health insurance.
What benefits does COBRA health insurance cover?
According to the U.S. Department of Labor, federal law requires that your COBRA insurance cover the same benefits to those that were included in your plan when you or a covered family member was an active employee. If you elect COBRA, your health insurance plan itself will remain the same. That means your plan will continue to include the same medical benefits that were covered when your insurance was provided by your employer. So keeping your previously held plan through COBRA means that all the same things your insurance used to cover will still be covered, like in-office physician care, inpatient and outpatient hospital care, prescription drugs, and dental and vision care.
Is my family covered under COBRA?
Anyone who previously was covered by your employer-provided health insurance is eligible to be covered under COBRA insurance. So, if you, your spouse and children were all covered previously, the whole family is also eligible to continue this coverage by paying the applicable premiums in full under COBRA. And if the insured employee dies or if there is a divorce, likewise everyone who was once covered is legally entitled to continue their coverage by paying for this same insurance under COBRA.
Does every employer offer COBRA health insurance?
Not every employer has to offer COBRA health insurance, but, generally, most do. The law ensures COBRA eligibility for all health plans offered by private-sector employers with 20-or more employees and by both state and local governments.
Work for the federal government, a church or other religious entity, or a small business with fewer than 20 employees? Your employer may not offer COBRA health insurance— but exact laws can vary by state, and some private-sector employers with less than 20 employees might offer something known as mini-COBRA. You can check with your employer and your state’s insurance commissioner for more information about exactly which employers offer COBRA and in what capacity where you live.
How do I sign up for COBRA coverage?
Once you’ve confirmed your COBRA eligibility and have decided that COBRA health insurance is the right fit for you, signing up is fairly straightforward.
The U.S. Department of Labor states that you’ll have 60 days to notify your insurance company of your qualifying event — like leaving your job. You can work with your employer to find out how to best contact your insurance company with this notification. After you have notified your insurance company of your qualifying event, your insurance company than has 14 days to send you a COBRA election notice, which will give you all the information about your health insurance plan (which should remain identical in terms of benefits to your employer-provided coverage) and its costs (which you will now pay out-of-pocket in full yourself).
After receiving the election notice from the insurance company, you’ll then have 60 days to return the election notice to the insurance company, signaling that you would like to begin COBRA coverage. You won’t pay your first premium when you send your election notice back, but will need to do so within 45 days after the start of your COBRA coverage.
How long does it take for COBRA to kick in?
With all paperwork properly submitted, your COBRA coverage should begin on the first day of your qualifying event (for example, the first day you are no longer with your employer), ensuring no gaps in your coverage.
Legally, if your employer is subject to COBRA requirements, they must notify the organization’s group health plan administrator within 30 days of your last day with your employer. At that point, the plan administrator then has 14 days to notify the former employee of their COBRA rights. Which is why the earlier you can begin this conversation with your company’s HR department, the better — if you know COBRA is the best choice for you, you’ll have more peace of mind knowing everything is all ready to go for your coverage to begin as soon as your existing coverage ends. And anything you can do on your end to help expedite the timeline to elect COBRA health insurance is always a win.
How long can I stay on COBRA?
In most cases, COBRA coverage lasts for exactly 18 months from the date of the qualifying event — and this will be the case if you leave or lose your job, or see a reduction in your hours that results in a loss of your benefits. In instances of death or divorce, COBRA coverage can last for up to 36 months.
When do I need to pay my first COBRA premium?
You’ll need to pay for your first COBRA premium within 45 days of beginning your COBRA coverage, which will begin with day one of your qualifying event. When you receive your COBRA election notice, it will include all the information you need on how much your premium payments are and where to send them and at what time intervals.
After you make your first COBRA premium payment for the first month’s coverage, premiums are then due within 30 days of the due date set by group health plan. Typically, most plans require premiums to be paid by the first of the month to continue coverage for that month.
While all COBRA plans must allow you to make monthly payments for your plan, some may also have the option to make quarterly or even weekly payments. Again, your COBRA election notice will have all the information you need about payments of your premiums, and the payment cycle options available to you.
What happens if I miss my COBRA payment?
You risk losing your coverage if you fail to make your first COBRA premium payment within 45 days of your qualifying event. After you make that first payment, however, there is a 30-day grace period for subsequent monthly premiums. That means you have 30 days after the premium due date to submit payment without losing your coverage.
It’s important to remember, though, that if you make your premium payment not by the due date but within the grace period, the insurance company administering your COBRA plan has the option and ability to cancel your coverage until your premium payment is received. If you make a payment during the grace period, the insurance company can then retroactively reinstate your coverage. Again, if you want to maximize your peace of mind — and eliminate the chance of any gaps in coverage — make sure all of your payments are submitted by their due dates.
Can I lose COBRA coverage?
Fail to make your premium payment even after the grace period? You could lose all your rights to COBRA health insurance, and be left without coverage and few options until Open Enrollment begins for Marketplace plans in the coming year. So make sure you stay on top of your payments to ensure that those are received by your insurance company in a timely manner.
Outside of failing to make your premiums, your COBRA coverage is guaranteed for the 18- or 36-month period for which you qualify for coverage. After that period ends, you will need to find alternate health insurance, should you wish to stay insured. And if you’re interested in other options once enrolled in coverage, you may do so during the standard Open Enrollment Period for Marketplace plans. And if you begin a new job that offers an employer-provided group health insurance plan, you can also terminate your COBRA coverage at that time and start with the new one with your new employer.
Certain life events can bring about changes in your health insurance coverage, so knowing your COBRA eligibility when you start a job can help you be prepared for when those changes come. For most people, it’s a great comfort to know that if your employment status changes, in most cases and with most employers you’ll be able to continue being covered by your same health insurance plan through the use of COBRA. With COBRA health insurance, you’ll have the exact same coverage you had under your employer-provided plan and will be able to keep that coverage, depending on the exact circumstances, for 18- to 36-months by paying the health insurance premiums out-of-pocket and in full each month.