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Is Cobra Available If the Employer Stops Providing Health Insurance?

The Consolidated Omnibus Budget Reconciliation Act of 1985 included provisions requiring employers with more than 20 employees to offer a continuation of the workplace group health coverage to employees for up to 18 months after they leave a job. This law itself and the continued health insurance coverage for employees have come to be known as COBRA.

  1. How COBRA Works

    • Employees become eligible for COBRA coverage if they experience a qualifying event. A qualifying event is either a voluntary or involuntary termination from employment or a reduction in hours leading to no longer qualifying for health insurance coverage. Although there are exceptions employees are responsible for paying the entire health insurance premium, including any amounts formerly paid by their employer, plus a 2 percent administrative fee.

    COBRA Insurance is the Same Insurance You Had Before but it Can Change

    • COBRA law mandates that you be included in your former employers health insurance plan, so your insurance will initially be the exact same insurance you had while you were working. However, businesses can change group health insurance providers on an annual basis, and you automatically are enrolled in any new or modified plan and are charged the new premium. You can, of course, opt out if you choose.

    COBRA Ends If Your Former Employer Stops Providing Group Health Coverage

    • COBRA coverage ends if your former employer stops providing group health coverage for employees for any reason, including individual business decisions or bankruptcy. From a legal perspective, COBRA laws simply no longer apply as there is no longer a group plan to mandate inclusion in.

    Federal COBRA Assistance for the Unemployed

    • The federal government began a program in late 2009 to pay 65 percent of the COBRA premiums of laid-off workers for up to 15 months. Although it is not accepting new enrollees, the program did continue to provide funds supplementing the premiums of unemployed Americans through most of 2010.

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