COBRA Insurance: What You Need To Know


WRITTEN BY: Craig Sturgill

UPDATED: AUGUST 04, 2022 | 2 MIN READ

COBRA, known as the Consolidated Omnibus Budget Reconciliation Act of 1985, is a job-based health plan offered by an employer. Before COBRA insurance, employees were at risk of losing their health coverage if they were fired, divorced, or changed jobs. Now, the federal government requires employers to offer coverage to former employees, spouses, and dependent children for 18 months or longer.

What Is COBRA Insurance?

COBRA health insurance kicks in when an employee no longer qualifies for group health coverage provided by their employer. This may be because an employee was fired, quit, or no longer works enough hours.

COBRA rights dictate that employers allow past employees to keep their health insurance benefits for at least 18 months. This gives the employee time to find another job or purchase low-cost individual health insurance.

COBRA is a federal law. So, it’s a benefit employers have to offer if they have 50 or more employees. But once you no longer work for that employer, the company doesn’t have to continue paying a portion of your health insurance costs. When you have continuation coverage, you’re responsible for paying 100% of your COBRA premium.

Who qualifies for it?

To qualify for COBRA health insurance, an employee must have enrolled in a health insurance plan through their employer. If an employer changes the plan, former employees won’t be able to participate as they have to have the same plan they enrolled in before their job loss.

Also, employers aren’t required to provide COBRA continuation coverage to any employees fired for gross misconduct.

How long can you keep COBRA insurance?

COBRA health insurance is only available to past employees for roughly 18-36 months after they leave their former employer. This gives them the time to find a different employer with insurance, get Medicaid or Medicare set up, or purchase coverage from the health insurance marketplace at healthcare.gov.

Benefits and coverage

If you meet the COBRA insurance eligibility requirements, your employer must provide the same coverage the employer offers current employees. If there are any changes to the group health plan benefits for active employees, it also applies to former employees. You have at least 60 days to choose whether or not you want to continue coverage.

How Does Cobra Insurance Work?

When a qualifying event occurs, such as a termination of an employee, reduction of hours, they die, or an employer claims bankruptcy, the employer must notify the carrier that someone is eligible for COBRA health insurance coverage. Beneficiaries are responsible for informing the insurance company if the qualifying event is divorce, legal separation, or child loss.

Once the beneficiary notifies the insurance company, the company provides election notice instructions. This states the employee’s right to continue their plan through COBRA. This happens within 14 days of receiving notice of the qualifying event.

What Does COBRA Insurance Cost?

The health plan beneficiary is responsible for 102% of the cost of the premium plan. The extra 2% is the administration fee charged to the participants. As a result, some beneficiaries find the health insurance plans difficult to afford, especially if their former employer paid the insurance premiums beforehand.

It’s important to consider all your individual health insurance options, including health insurance exchange, before deciding if COBRA suits you.

Pros and Cons Of COBRA Insurance?

There are both pros and cons to having COBRA insurance. You must weigh the pros and cons to determine if the plan is right for you.

Benefits of COBRA insurance

The pros of COBRA health insurance are that you can continue the same insurance plan you are familiar with, including the same physician and medical network providers. You retain the same coverage for pre-existing conditions and keep your regular prescription drug plan. The plan might cost less than standard health plans and protect you against high medical bills.

Disadvantages of COBRA insurance

The cons of COBRA health insurance are that you might not expect to have now to pay insurance costs if you are used to your employer covering your cost. COBRA benefits are also available only for up to 36 months from the start. If the employer opts to change coverage to a different insurer, you won’t have access to COBRA.

FAQs

Is it worth paying for COBRA health benefits?

COBRA insurance is an excellent option for health insurance after you leave your job. However, you pay 100% of the premium payment when you have a COBRA plan. This means your insurance costs will be higher than when you still had full employee benefits.

On the plus side, if you elect to use continuation coverage, you have health coverage t pay your medical expenses until the year’s open enrollment period or until you find another job.

What’s the difference between COBRA and Medicare?

Medicare is your primary insurance, while COBRA is secondary. Medicare covers the majority of your healthcare costs, so it’s one that you should keep.

If I waive COBRA coverage during the election period, can I still get it later?

You can apply for coverage again through COBRA insurance after waiving it as long as it’s within the election period. You have to revoke your waiver and elect continuation coverage.

Can COBRA coverage be terminated for any reason?

Termination of COBRA insurance happens in the following cases:

  • An employer failing to maintain any group health insurance
  • Failure to pay premiums on time
  • A qualified beneficiary obtaining coverage with another employer, becoming eligible for Medicare, or engaging in fraud

Can I extend my COBRA insurance coverage?

Only two circumstances would allow you to extend your COBRA coverage. First, if a family member is disabled, you may get an extension of 11 months. The other circumstance is the death of a covered employee, a divorce of a covered employee, and spouse or the loss of a child.

Find Health Insurance

COBRA health insurance doesn’t last forever, but it’s important for you to maintain a reliable health insurance plan. Get health insurance quotes today to find an option that fits your needs.