10 things you should know about COBRA
By Vicki Lankarge
(Last updated Oct. 22, 2002)
Sixty-seven percent of Americans under age 65 who have health insurance receive
it through an employer. So it's little wonder a fear of losing your job is
compounded by a fear of losing your health insurance.
But there is hope. You may be eligible for the continuation of your health
insurance benefits through a federal law known as COBRA — short for the
Consolidated Omnibus Budget Reconciliation Act.
COBRA provides a vital bridge between group health insurance plans for qualified
workers, their spouses, and their dependent children when their health insurance
might otherwise be cut off. It's a safety net for families in the midst of
crisis, such as unemployment, divorce, or death. Yet many people don't know how
COBRA works or where to turn when they encounter problems with the program. Read
Know your COBRA rights for full details.
COBRA generally requires that group health plans sponsored by employers with 20
or more employees offer workers and their families the opportunity to
temporarily extend their health insurance coverage. But did you know that the
law also grants an exemption to the District of Columbia, federal employees,
certain church-related organizations, and some firms employing fewer than 20
people? There are many more things you should know about COBRA. Here are another
Voluntary or involuntary job loss (except in instances of gross misconduct)
triggers 18 months of COBRA coverage for you and your dependents. However, your
spouse and dependent children are entitled to 36 months of continued
coverage under certain circumstances:
Additionally, your dependent child is eligible for 36 months of continued
coverage under COBRA when he or she loses dependent-child status on your
health insurance plan. Read
Health insurance options after loss of "dependent" status.
- You become eligible for Medicare.
- You get divorced or legally separated.
- You die.
When an employer goes out of business or drops its employee health insurance
altogether, the group that formed the basis for its group health insurance plan
disbands. When this happens you are no longer eligible to receive COBRA.
Let's say you lose your job in California and decide to seek new employment in
Boston. You can still enroll in COBRA, but it's not going to do you any good
unless you intend to fly to California every time you need medical treatment or
a prescription. Most health insurance plans insist that you use their local
provider networks. Your employer is not required to offer you a plan in
your new area.
Cost is a major factor to consider when buying COBRA coverage. By law, you have
to pay 100 percent of the plan's premiums, plus up to a 2 percent administrative
fee. According to Families USA, the national average cost of employer-provided
family coverage under COBRA, plus the 2 percent administrative fee, is $7,194
per year, or about $600 per month. That's a lot of money for someone trying to
support a family on the national average monthly unemployment benefit of $939
If you plan to skip COBRA — because it's expensive or you're hoping to find
another job that offers group health insurance — think again. Consider what
could happen if your job search drags on longer than you expect, you're
diagnosed with a chronic or serious illness, or, if you're a woman wanting to
start a family, you become pregnant. If you create a gap in your coverage of
more than 63 days, you'll lose your health insurance rights under the federal
HIPAA (the Health Insurance Portability and Accountability Act) guarantees that
people who have continuous health coverage — without a gap of more than 63 days
— can't be denied health insurance even if they have a pre-existing condition,
such as diabetes. So if you forgo COBRA and wind up with a three-month gap in
your coverage, you would lose your HIPAA protection when you later decide to buy
insurance. This could lead to serious financial consequences. Read
The HIPAA law: Your rights to health insurance portability.
If you are determined to be disabled by the United States Social Security
Administration (SSA), you may be entitled to up to 29 months of COBRA if:
- You have experienced an 18-month qualifying event for COBRA (voluntary or
involuntary job loss).
- SSA has determined you were disabled either before the COBRA event or within
the first 60 days of COBRA continuation coverage.
- Your health plan administrator has a copy of your SSA disability
determination within 60 days after the determination is issued and before the
end of the initial 18 months of COBRA.
Even if you work at a small company that is exempt from federal law, you might
not be completely out of luck when it comes to COBRA. Many states have their own
"mini-COBRA" laws that give workers at firms with between two and 19 employees
the right to purchase COBRA. Read State-specific
laws for COBRA.
If your former employer offers an open enrollment period to active employees and
you're on COBRA, you (and your COBRA-enrolled spouse and dependent children)
also have the right to switch health insurance plans at that time. You may also
add new dependents if your employer offers this option to active employees.
Newborns, however, can be added at any time during the year as long as they are
added within 30 days of birth.
If you have questions about COBRA or self-insured
employer plans, which are both governed by the U.S. Department of Labor, contact
your regional or district office of the Pension and Welfare Benefits
Administration of the U.S. Department of Labor.
COBRA beneficiaries have 60 days to decide whether they want COBRA coverage. If
you enroll in COBRA before the 60 days are up, your coverage is then
retroactive, providing you pay the retroactive premiums. This means that you can
initially put off your decision about COBRA, but if you experience health
problems that generate medical bills in excess of COBRA premiums within the time
limit, you can retroactively — and legally — elect COBRA to cover those bills.
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