What is COBRA insurance?
Cobra or the Consolidated Omnibus Budget Reconciliation Act of 1985 is a law that protects individuals who happen to lose their employer-based health benefits. It’s a law passed by the U.S Congress that allows employees to continue the use of their health plan after leaving their employment for various reasons. The biggest drawback of this benefit is the cost. You must pay the full premium to enroll in cobra.
COBRA law states both who is eligible for COBRA Insurance as well as how much it costs and the duration. The law also lays the responsibilities out for the employers and the penalties when they fail to comply. Lastly, it explains the time limits and deadlines for the enrollment of COBRA.
- Voluntary or Involuntary termination of the current employee’s employment for any reason other than gross misconduct
- Death of the employee who is covered
- Covered employee who work hours has reduced.
- Divorce or separation (legally) of the covered employee
- Eligible to enroll in Medicare if covered employee can enroll
- Dependent child under health plan rules if loss of status
Note: Any qualifying beneficiary refers to who can actually enroll in COBRA coverage continuation and extends to the spouse and any dependent children, normally.
Payments for COBRA Under the Law
Coverage may be lost if the payments are not made on time. In addition to the premium cost, individuals are also responsible for all co-payments, deductibles and all expenses that are part of the health insurance. Moreover, premium cost may be increased if the health insurance plan becomes more costly
After the loss of employment worrying about healthcare can become stressful. Thankfully COBRA helps make sure we have healthcare coverage. Although it can become very costly, here is how they determine how much we pay. Many times when we are employed the employer invests in paying a large portion of our insurance and we are left to pay a small portion of the cost. Once we lose employment, the entire cost is now our responsibility. The cost of COBRA is 102% of the monthly premium. That premium consists of both what you paid and also the employer’s portion.
Calculating the Cost of COBRA Insurance
If you have your pay stub available you can easily figure out the amount. Simply locate the portion of the pay stub that mentions “monthly contribution for insurance” and add both amounts. If you are unable to locate the pay stub, you can then contact your former employer and speak to someone in the human resources department and they will gladly assist you in figuring out the amount.
If you do not have a pay stub with the information you can still counter produce the number. The premium must be paid plus a 2% administration fee. So, if you were paying $200 per month and your employer was paying $300 per month towards your health insurance, that means the total price was $500. You would pay that + 2% for a total of $510 per month.
Applying for COBRA Coverage
Once you lose employment, typically you receive a letter from the health insurance or the employer. The letter states what you should do next for your insurance. It gives you some time to figure out what you want to do, so don’t worry. You don’t need to decide immediately, but it is in your best interest to contact COBRA and understand your options and cost so that you can then make the correct choice for yourself. If for any reason you did not receive a letter, don’t worry. You can contact your employer and they can help you locate the phone number and information needed.
When you have a Qualifying Life Event, by law the employer must provide you with a notice that the COBRA is available. You can either get this via mail or in person depending on your employer. As soon as you receive the notice you have 60 days to choose if you would like to take the COBRA continuation coverage option. If you do not choose to select the COBRA continuation coverage, then the employee coverage will be retroactive to the day the employee lost their health insurance benefits since it was Qualifying Event.
When to consider COBRA
- If the employee has been denied private health insurance
- If employee is pregnant or is planning to be pregnant within the period of the COBRA coverage
- If employee has a pre-existing medical condition
- If employee is taking any prescription medications or needs to undergo a medical procedure in the near future or needs any extensive medical care
Insurance Options After COBRA has Ended
The reality is the people would love to have health insurance by the time their COBRA coverage ends or runs out. But the fact is that many people do not get health insurance. With unemployment still high, when COBRA coverage runs our most are still looking or seeking for new health insurance policies. The good news is that there are many options to find new health insurance coverage even for the people who have serious medical needs or people who have pre-existing conditions. Below you will find 5 ways to enroll.
Trade group and alumni insurance plans
Trade and/or Alma mater, you can sign up for health insurance plan sponsored by an alumni organization/university or by a trade group. If member pays the annual dues, many trade groups offer group health insurance plan. Due to these plans varying coverage and cost it is mandatory to examine them carefully and price them against a private plan.
Employer sponsored health insurance
Traditionally many families have kept lower paying jobs just for the sake of having affordable health coverage for their families. With the cost of health care rising and the cost of health insurance tagging along having an employer that pays some or all your health insurance premium is always a great option.
If married, enroll in spouse’s insurance plan
The easiest and the most cost-effective way is to enroll in your spouse’s health insurance plan if their employer provides coverage for employees if they cover parts of your premium. If you enroll in your spouse’s plan, you will be able to get comprehensive benefits and many people will not get denied coverage due to pre-existing conditions. Just note that planning on enrolling in a spouse’s plan that many plans limit the adding of another person plan to enrollment periods. This happens once a year. Just keep an eye on the open enrollment window so you don’t need to find a short-term plan or worse—go without coverage.
Private insurance plans
When COBRA insurance coverage ends, the most common path is to enroll in private insurance. You can get many options with a private insurance plan and most people are surprised when they see the level of coverage they offer. Most people find savings when they compare the price of the COBRA coverage and the private plans.
State insurance plans
All states offer some sort of medical plan for residents and fall in certain income limits. You can contact the Health and Human Services office in your state. There are many different names for these plans. If you are eligible you may receive reduced or even free health care for families, children, and individuals.