COBRA Insurance

Cobra is a health care health benefit provision that passed Congress in 1986.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) provides certain former employees, spouses, former spouse’s retirees and dependent children to right to a temporary continuation of health coverage. View a more detailed overview of COBRA insurance at MyCreditClassroom.com

COBRA allows the coverage to be continued at the group rates. However, it’s more expensive than an active employee would pay. The reason is that COBRA participants pay the entire group rate without employer contribution.

It is generally less costly than individual health coverage.

COBRA Qualified

To qualify for COBRA benefits, there are three sets of criteria for plans, qualified beneficiaries and qualifying events.

Plan Coverage- Generally, employers with 20 or more employees who are covered by a group health plan are subject to COBRA. Both full and part time employees are covered.

Qualified Beneficiaries- In general, if you’re covered by a group plan on the day before a qualifying event, you’re a qualified beneficiary.

Qualifying Events- These are events that would cause you to lose health coverage. For example, qualifying events for employees include:

• Voluntary or involuntary termination for any reason other than gross misconduct
• Employment hour reduction

For spouses:

• Voluntary or involuntary termination for covered employee’s employment for any reason other than gross misconduct
• Reduced hours worked by covered employee
• Death of covered employee
• Divorce or legal separation of covered employee

For dependent children- All of the above with the addition of loss of dependent status.

COBRA Process

The employer must notify plan administrators within 30 days of the qualifying event. Employees or qualified beneficiaries must notify the plan administrator within 60 days on whether they elect COBRA continuation coverage. The premium is due 45 days after that.

COBRA is good for 18 months. However, there are circumstances when the coverage can be extended to a maximum of 36 months. It could end earlier if:

• The premium is not paid
• The employer stops maintaining any group health plan
• The beneficiary becomes entitled to Medicare

Benefits Covered Under Cobra

Generally, beneficiaries must be offered identical coverage to what they had prior to the qualifying event. In fact, they’re treated the same as beneficiaries of the group plan not under COBRA.

The Cost of COBRA

The beneficiaries may have to pay for COBRA. However, the premium can’t exceed 102 percent of the plan cost for individuals. You may also have to pay a 2 percent administrative fee.

If, as a qualified beneficiary, you receive the 11 month disability coverage extension, the premium may be increased to 150 percent.

You must be allowed to pay premiums on a monthly basis or other intervals at your request.

While the cost may seem high, it’s still the group rate which is less than an individual health policy.

The American Recovery and Reinvestment Act

The 2009 stimulus package did provide for reduced premium (35% of COBRA premium costs for up to nine months) and expanded COBRA eligibility for certain beneficiaries. Contact your plan administrator for details.

Steve Wyrostek -MedicalInsurance.org Expert A 20 year plus veteran of the insurance industry, Steve managed departments in the personal and commercial lines areas of major insurers. He’s familiar with how insurance—ranging from boat to workers compensation—works.