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What is COBRA?
Federal law requires most employers with over 20 full time employees to offer continuation health insurance coverage to laid-off workers for 18-36 months. Up until recently, COBRA premiums were subsidized up to 65%. Since June 1st 2010, employees must again pay the full cost plus a 2% administration fee.
You can read a brief summary of COBRA. And if you want to download 110 pages, here is the full text of the Consolidated Omnibus Budget Reconciliation Act. Also read some useful COBRA definitions
COBRA Cost
The cost of maintaining the average COBRA policy is estimated
* at $1,137 per month for family medical coverage
and $410 per month for individual health insurance coverage. This is an outrageous sum to many who are laid off or worse and struggling just to pay the rent or mortgage. If you are sick or healthy, there are
alternatives. Your specific cost must be sent to you in a final notice.
COBRA Notices
You have 60 days after you get your Notification to accept coverage and 45 days to make the first payment. Read about COBRA with sample final
COBRA notices. Notification of your continuation benefits is the responsibility of the plan administrator. The plan administrator is supposed to contact you within 44 days of termination but many don't, from oversight or ignorance of the law.
If you worked for an employer with 100 or more employees, You also might be given a notice under the
Worker Adjustment and Retraining Notification Act (WARN) of 1988.
Also read the
February 1999 final regulations, which cover
underpayments, relocating, claims payments before enrollment, counting part-time employees, successor employers, Maximum Coverage Period, Family Medical Leave Act and beneficiaries who change their health coverage before a divorce.
If you don't get a notice mailed or hand delivered to you (and are qualified), you can either contact a government investigator, hire a lawyer, and/or sue in federal court. This might only make sense in case of an accident, premature birth, catastrophic illness or other expensive medical emergency. Look in our state law directory to see if your state has enacted any mini cobra laws.
We have reprinted some useful pages about what happens to your benefits if your company is sold, after an employers bankruptcy, health care benefits after a job loss, work structure changes and your company plan, and questions and answers.
Fines involved
Employers must be serious about offering their qualified employees continuation coverage. The excise tax penalty is $100 per day, per violation, per person for each day of noncompliance (if there is only one qualified beneficiary in respect to the same violation) to $500,000 or ten percent of the health plan costs in the previous year, whichever is less. ERISA provides notice penalties of up to $110 per date from the date of non-compliance. Read more about
COBRA fines for non compliance.
How hard is it to qualify for COBRA?
The main requirement is that you lose employer-based health insurance benefits. This may be from:
- A reduction in hours;
- Voluntarily quitting or being downsized;
- Divorce or legal separation of a spouse with coverage;
- Legal Separation from a spouse with health insurance coverage;
- The death of a spouse;
- When a parent loses health insurance;
- A dependent turning 26;
- Someone becoming disabled, leaving the workplace; and
- A worker turns 65 and signs up for Medicare.
People that usually don't qualify for COBRA:
How expensive is COBRA now?
We previously mentioned the average estimates, but you need to get your specific premium disclosed in your COBRA notice. The monthly premiums are paid in full, 100% by the employee, plus a 2% administrative fee. From September 1st, 2008 through May 31st, 2010 (Read about the
Stimulus), the government was subsidizing 65% of the premiums. Workers who lost their jobs after May 31st, 2010 won’t be eligible for a 65 percent federal subsidy. Those already receiving the COBRA subsidy may continue to pay reduced premiums for up to 15 months, according to the Department of Labor (DOL). Many healthy people simply need
temporary health insurance, which is typically much cheaper than COBRA, if you qualify medically.
How long do COBRA benefits last?
In most cases, after 18 months or extended benefits, your
continuation benefits end. You may still able to get new coverage under
HIPAA, although the prices are generally even higher.
In cases where you become disabled, your extended coverage can last 29 months. A covered employee’s spouse or children who lose coverage due to a divorce may elect coverage for 36 months.
Is COBRA the right insurance option for you?
That will depend on your current health and your long term goals. Enroll in COBRA if you can afford it AND: if you are in poor health, over 50, attached to your current doctor, or are on expensive medications. It helps to find out if your health insurance carrier offers conversion policies, so you can
convert your COBRA coverage to an individual plan.
COBRA provides important protection to those with pre-existing health conditions
Healthy individuals may be able to purchase a plan on their own for a lot less money
COBRA may be the right choice for some family members but not all. Review our extensive list of reasons
why to elect COBRA.
You should consider electing COBRA if you are pregnant, over 50, in poor health, or attached to your current doctor. You may not
qualify for COBRA
If you have
pre-existing conditions and can't get individual health insurance, you can review
these options, or enroll in your
state high risk pool. We have also posted information on
domestic partnerships and group health benefits.
How much are alternatives?
If you are in good health, private medical insurance is usually much cheaper, but the benefits can also have more limitations.
Healthy younger individuals may be able to purchase a plan on their own for less than $100 a month and want only a catastrophic hospitalization type plan. You can compare
COBRA insurance alternatives.
Has your medical claim been denied?
Health plan rules must explain how to obtain benefits and must include written procedures for processing claims. Claims procedures must be disclosed in the Summary Plan Description (SPD). Read more on the
appealing medical claims.
If you are a senior, get info on
Medicare and COBRA.
Pregnancy and COBRA
If you find yourself
pregnant on COBRA, don't despair (yet). With some planning and if you are in the early stages of pregnancy, you should be covered.
* Kaiser Family Foundation
