A major component in choosing a career is the benefits provided—especially health insurance. But what happens to your coverage if you get laid off? Or quit? Or get fired?
We’re going to cover the ins and outs of Cobra insurance to see who qualifies, what’s covered, and if it’s really the holy grail of transition periods.
What Is Cobra Insurance?
First and foremost, what is Cobra insurance? Cobra (Consolidated Omnibus Budget Reconciliation Act) coverage is a health insurance plan backed by a federal law for employees and their families that recently lost their coverage from their job.
Unlike most healthcare options, Cobra is not a long-term solution. Rather, it’s intended to provide short-term health coverage during times of transition until you get back on your feet and either secure a spot in your new job’s health group plan or find a suitable individual/family plan.
Who Qualifies For Cobra Insurance?
Cobra insurance is offered to those that experience a qualifying event, such as:
- You lost your job (voluntarily or involuntarily)
- Someone in your household died
- You got divorced
- Your hours of employment were reduced, making you ineligible for the group health insurance plan
Keep in mind that you lose eligibility if you are terminated due to gross misconduct.
Here are some of the greatest features of Cobra health coverage.
Avoid A Lapse in Coverage
The biggest incentive Cobra has to offer is the fact that it’s designed to keep you from having a lapse in coverage while you look for a new job and/or health policy. However, as mentioned before, Cobra does not provide a long-term solution, so you will need to find another option eventually, even if you do opt for a Cobra policy.
Going a step further, Cobra continuation coverage means that not only will you not have a lapse in health coverage, but you will also be offered the same policy that you had while you were an active employee—meaning you will be offered your same deductibles, coverage amounts, providers, etc.
Coverage Extends To Dependents
Also, similar to your group health coverage, your Cobra plan is not limited to one person. Have a dependent child? You’ll be happy to know that they are covered by your Cobra policy too! In fact, all eligible family members can receive Cobra health benefits even if you yourself decline the plan.
You have 60 days to decide whether or not you want to accept your Cobra coverage after a qualifying event. This time period is known as an election period. If you decide you want coverage on day 50 of your election period, you can make the appropriate payment and backdate your coverage to match. The same election period applies, even if you have a medical claim. So, in other words, if you have a claim on day 45 of your election period, you can pay your Cobra premium retroactively and have your claim covered.
Here are some of the biggest complaints people have about their Cobra plan.
One of the biggest drawbacks to Cobra insurance is that it is notoriously expensive. Active employees utilizing their group health plan often split the premium with their employer as an added workplace benefit. Cobra premiums, on the other hand, will not be shared; you’ll have to shoulder the cost yourself. Therefore, things can get very expensive, very quickly.
No Long-Term Options
Cobra coverage is generally offered for 18 months, although you may find some people that qualify for coverage for up to 36 months. Therefore, you will still have to find a new health insurance company.
How Does Cobra Compare With The Affordable Care Act (Obamacare)?
Losing your group health coverage will open a special enrollment through the health insurance marketplace and Cobra. But how do you know which avenue to pursue? Here are some of the biggest things to consider when weighing your options.
Continuation of Coverage Vs. A Brand New Plan
While ACA policies tend to be more affordable for families that qualify for a subsidy, keep in mind that you are losing your current coverage altogether and will need to apply for a brand-new plan. Cobra provides a continuation of coverage, meaning that you’ll keep the conditions of your current policy. This becomes primarily important when looking at your list of in-network providers. A good example is someone that comes from a Blue Shield group health plan. Even if you sign up for an individual Blue Shield plan through the Marketplace, your conditions may be different.
Duration of The Policy
As mentioned previously, Cobra policies are intended to provide short-term coverage. A policy through the Marketplace will not be subject to any time limits.
Cobra Is Now or Never
While losing your employer plan will create an open enrollment period for both Cobra and the Marketplace, your Cobra eligibility will end after 60 days—you won’t have another chance to apply for continuation coverage. On the other hand, even if you decide to go with Cobra initially, you can still switch back to Marketplace during regular open enrollment.
Here’s a quick look at some of the most commonly asked Cobra questions.
How do I apply for Cobra insurance?
It’s common for your HR representative to provide you with more information about your options as you go through the termination process. However, you can also get more information from the Department of Labor (dol.gov)
How long do I have to enroll in Cobra after I lose my employer group health plan coverage?
You have 60 days after you lose employer-provided health coverage to sign up for your Cobra plan. This enrollment period is called an election period. You can decide to sign up for the plan at any point in the 60 days and pay the appropriate premium to get coverage retroactively.
Are there long-term options for Cobra?
Unfortunately, no. Your Cobra health insurance coverage will expire after 18 months, and you’ll need to find another option. It is recommended that you continue looking for long-term coverage options during those 18 months to avoid any lapse in coverage.
Does anyone not qualify for Cobra?
While Cobra coverage is offered to most people, there are a few exceptions. Those coming from a job in the federal government, church, or church-related organization are not eligible for a Cobra plan. You may also lose eligibility if you come from a small business with under 20 employees, depending on where you live.
Is Cobra Worth It?
Losing a job or having your hours reduced is stressful enough without having to worry about how you will get health insurance. Thankfully, a federally-protected option is available. Cobra (Consolidated Omnibus Budget Reconciliation Act) coverage provides the option to continue the same coverage at an increased rate for a short period of time. Keep in mind that because you won’t be sharing the cost with your employer, a Cobra plan will cost you more than you were paying through your group health plan. However, a Cobra policy could be exactly what you need to transition to a more affordable long-term solution without a lapse in coverage.
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