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Who Pays for COBRA Coverage?

Employers providing health coverage for 20 or more employees must provide continued insurance benefits, according to the Consolidated Omnibus Budget Reconciliation Act (COBRA). Enacted in 1985, COBRA helps terminated employees pay for health benefits received during employment. COBRA also helps the survivors of deceased employees and the spouses of divorced employees obtain self-paid health insurance coverage. COBRA coverage usually extends for 18 months after separation from the company.

  1. Costs

    • Employers may charge a former employee or related persons for continuing health insurance coverage under COBRA. They may charge former employees, survivors of a deceased employee or the former spouse of a divorced employee up to 102 percent of the company's cost. Substantial federal and state penalties may apply to employers who fail to advise employees and related individuals of rights to COBRA continuing health coverage.

    Mini-COBRA

    • States may have additional COBRA-related laws. Depending on the state, employers must provide from one to 18 months of coverage. Small businesses--as small as only two employees--also must provide continuing coverage under these laws. Before discussing the continuation of health insurance coverage, companies and former employees should refer to state laws. Most states require that the employee have at least three months of employer coverage prior to termination to be covered under mini-COBRA laws, according to Barbara Kate Repa in "Your Rights in the Workplace."

      Nancy Dunnan, in "Recession-Proof Your Life," suggests that young, healthy former employees evaluate costs of an individual insurance plan purchased directly from an insurance company. Alternatively, a spouse's insurance coverage may provide a less expensive option to former employer COBRA coverage.

    Elect COBRA Coverage

    • Former employees have up to 60 days from the date of separation to sign up for COBRA coverage. You may elect to delay payment for your coverage for up to 60 days. If you're likely to find another job within 60 days, delaying your payment may make sense financially. If you've got any pre-existing health conditions, consider paying for COBRA. A new employer may delay your enrollment in the company's insurance plan for 90 days. The insurance plan with the new employer may not have an obligation to pay for the costs of a pre-existing condition, according to Jack Hungelman in "Insurance for Dummies."

    Considerations

    • Employees terminated for serious misconduct, such as theft or violence, may not have access to COBRA continued coverage. Employers may opt to define serious misconduct as it applies to the company, according to Lisa Guerin and Amy DelPo in "Create Your Own Employee Handbook: A Legal and Practical Guide."

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