What if you were unexpectedly laid off from your job. With no job on the horizon, how would you continue health insurance? For some individuals and families suffering from a job loss can find solace in COBRA.
Consolidated Omnibus Budget Reconciliation Act or COBRA is a law passed by Congress in 1985 that amends the Internal Revenue Code and the Public Health Service Act to allow employees and their families (including spouse and dependent children) the right to continue health insurance coverage at their own expense after leaving employment.
This coverage is temporary, around 18-36 months, but helps offset the loss of coverage due to job loss, loss of hours and other personal catastrophic life events such as a divorce or death of spouse. However, you would not quality if your loss of health insurance is from the employer’s bankruptcy, the company goes out of business, the employer completely gets rid of their health insurance plan, or if the employee was terminated for gross misconduct.
Employers must provide COBRA if they employ more than 20 employees, including all full- and part-time, as well as those who are self-employed. The law does not apply to health plans from church-related organizations and Federal government
Employers cannot use health insurance as a tax deduction if they do not offer COBRA to qualifying employees. If an employer is not compliant in COBRA procedures they can also be fined an excise tax.
COBRA allows former employees to maintain temporary health coverage at group rate. It is generally more expensive because the employee is covering the premium that the employer formerly covered, and may not cover everything that the original health plan covered. However, it is generally less expensive than individual health coverages.
COBRA is ideal for people who have continuing or a history of health problems (i.e. a preexisting condition), those who are pregnant, those who have expensive medications or those who need guaranteed coverage even if they have to pay more for the coverage. COBRA might not be ideal for individuals who are healthy and could otherwise find cheaper individual health insurance coverage or temporary health insurance.
Coverage under COBRA varies. Most COBRA plans do not cover the same things as the original health insurance plan, however it generally covers inpatient and outpatient hospital care, prescription medications and other medical benefits.
Is COBRA right for you? If your loss of employment qualifies you for COBRA, you should consider a few things.
- Do you have a preexisting condition that will prevent you from getting cheaper private health insurance?
- Do I have a history of health problems?
- Is COBRA the cheapest health insurance for the coverage that I need?
- Does my employer qualify and/or offer COBRA?
- Did your employer have more than 20 employees?
If you answered yes to any of the questions above, then COBRA might be the right plan for you.