Cobra Insurance

What is Cobra insurance and how does it affect my health insurance coverage?

Explanation of COBRA Insurance rights.

Cobra is the federal law enacted to provide health insurance for people and families who have lost their job(s). COBRA also is used during life changing events such as divorce, or death.

Under COBRA, if you voluntarily resign from a job or are terminated for any reason other than "gross misconduct" you are guaranteed the right to continue your former employer's group plan as individual or family health care coverage for up to 18 months at your own expense. In many cases, your spouse and dependent children are also eligible for COBRA coverage, sometimes for as long as three years. There are several exceptions to the COBRA law that you should be aware of. You may not be eligible for COBRA if you bought the insurance yourself, are a federal employee, work for a church related organization or work for a firm employing fewer than 20 people.

Here are the situations that warrant coverage under COBRA. If you are terminated or have your hours cut back, you, your spouse, and any dependent children are guaranteed coverage for a maximum of 18 months. If you the is a divorce, legal separation, loss of dependent child status, death, or Medicare entitlement, your spouse and any dependent children are guaranteed coverage for a maximum of 36 months. Remember: You are not required to stay on COBRA for the maximum 18 or 36 months.

Even if you work at a small company that is exempt from federal law, you might not be completely out of luck. Many states have adopted their own laws that often grant broader rights in determining eligibility for coverage. Check with your state insurance department to find out if you are entitled to continued health care coverage under a state COBRA plan.

COBRA is only available to individuals who are actually covered by a health insurance plan. It doesn't really matter how large the company is, you must currently be covered in order to qualify for coverage.

Here are the following reasons COBRA coverage could end even if you are eligible: You reach the last day of maximum coverage, Premiums are not paid on a timely basis, The employer ceases to maintain any group health plan, You obtain coverage through another employer group health plan that does not contain any exclusion or limitation with respect to any pre-existing condition of a beneficiary, A beneficiary is entitled to Medicare benefits.

When considering COBRA, cost will undoubtedly become a very important issue. Typically monthly premiums will range in to $400-$600 for a family. The bottom line: When you're on COBRA, your employer does not pick up a big chunk of the monthly premiums. You'll be responsible for paying the full amount, plus an administrative fee of up to 2 percent. You'll have to weigh your ability, and desire, to pay the extra expenses against your and your family's need for health coverage and the financial dangers of going without it.

Additionally, people who have "pre-existing conditions" (meaning medical problems that exist before you buy a policy) find it much more difficult to buy individual health coverage. In most cases insurance companies with exclude many pre-existing conditions for being covered. Pre-existing condition exclusions can be temporary, in the case of pregnancy, to permanent in the case of a more serious health problem. Some states ban that practice and federal law forbids all group health plans from medically underwriting you).

You may also be protected under HIPAA. HIPAA is federal law that guarantees people who have continuous health coverage (and meet certain other qualifications) can't be denied insurance even if they have pre-existing conditions. The only way you lose protection under HIPAA is if you forgo COBRA and thus create a gap in your coverage.

Your coverage offered under COBRA must be identical to the coverage you had before. However, employers can (but are not required to) give you the option of dropping such optional benefits as dental and vision care.

To initiate coverage you and your employer must follow proper procedure. The employer must notify the health plan administrator within 30 days after an employee's death, job termination, reduced hours of employment, or eligibility for Medicare.

In cases of divorce, legal marital separation, or a child's loss of dependent status, it is your or your family's responsibility to notify the health plan administrator within 60 days of the event.

Once notified, the plan administrator then has 14 days to alert you and your family members (in person or by first-class mail) about your right to elect COBRA. The IRS gets tough here: If the plan administrator fails to act, he or she can be held personally liable for breaching their duties.

There are two exceptions to the notification rule, if the plan allows them: First, the time limit for both notification periods can be extended; and second, employers may be relieved of the obligation to notify plan administrators that the employees quit or reduced their work hours. It is then up to the plan administrator to determine if a qualifying event has occurred. You should find out in advance what your health plan allows.

You, your spouse, and children have 60 days to decide whether to buy COBRA. This election period is counted from the date your eligibility notification is sent to you or the date that you lost your health coverage, whichever is later. Your COBRA coverage will be retroactive to the date that you lost your benefits (as long as you pay the premium).

During the election period when you have to choose whether to buy COBRA, you might initially decide not to, which means you waive your right to coverage. However, as long as the election period hasn't expired, you can change your mind and revoke your waiver, and COBRA coverage would then start on the day the waiver was revoked. Bear in mind that if you visit a doctor during the period you initially waived COBRA, you will not be reimbursed for that claim even if you later decide to buy COBRA. In this case, COBRA is not retroactive to the date you lost your employer-sponsored plan.

Here are a few more things you must keep in mind regarding COBRA:

Conversion plans. If the health plan offers the option of converting from a group plan to an individual policy under COBRA, you must be given that option and allowed to convert within 180 days before COBRA ends. But you'll pay individual, not group, rates, and switching to individual coverage could weaken any HIPAA protections you have.

Disability. People eligible for Social Security disability benefits may receive COBRA coverage for 29 months.

Moving. If you relocate out of your COBRA health plan's coverage area, you will lose your COBRA benefits; the employer is not required to offer you a plan in your new area.

Extensions. Although COBRA sets specific time limits on coverage, there is nothing stopping the health plan from extending your benefits beyond the coverage period.

Life insurance. COBRA makes no provisions for life insurance.

Notification rights. The U.S. Department of Labor (DOL) has jurisdiction over issues involving notification of private-sector employees about COBRA coverage. Employers that fail to comply with the notification rules face fines of up to $110 for every day that no notice is sent after the deadline. In addition, the IRS can assess an excise tax against any company that does not comply with COBRA regulations.

New workers. Newly hired employees must be given an initial general notice about their COBRA rights.

Plan description. COBRA information must be contained in the summary of the health plan description employees must receive when they are new to the plan.

Premium costs. Your premiums can be increased if the costs of the health plan increase for everyone at the workplace, but generally they must be fixed in advance of each 12-month cycle. The plan must also allow you to pay premiums on a monthly basis if you want.

Premium payments. After you elect COBRA, you have to pay the first premium within 45 days. And that first premium is likely to be high because it covers the period retroactive to the date coverage ended through your employer. Successive payments are due according to health plan requirements, but COBRA rules allow for a 30-day grace period after each due date for payment.

Premium notices. Neither the health plan nor the employer are required to send you monthly premium notices, so make sure you pay attention to due dates.

Switching plans. If your employer offers an open enrollment period to active employees and you're on COBRA, you must also be given the option to switch plans during that time.

If you have any more questions regarding COBRA, it is probably best that you contact your local or state insurance office.

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