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Problems With Cobra Insurance

The Consolidated Omnibus Budget Reconciliation Act or COBRA states that a company with more than 20 employees must offer continuing health care coverage to people who have lost their benefits through job loss, a reduction in work hours, divorce or death of spouse. Though maintaining health insurance coverage through COBRA is an option for people who lose their jobs and/or insurance coverage, it does not come without problems for those seeking continuing coverage.

  1. Cost

    • One of the single biggest problems with COBRA insurance is the cost. Health insurance with a group plan is generally cheaper because contributions made by the employer and employees offset the total cost of the individual insurance plans. COBRA requires the person electing COBRA coverage to pay the entire cost of the insurance premium. Employers can charge COBRA participants up to 102 percent of the insurance premium. For example, if a person has a COBRA plan that costs $1,000 per month for the premium, the employer can charge an additional 2 percent on top of the premium costs. The additional 2 percent is for administrative fees.

    Time Limitations

    • In addition to the expense of COBRA, another problem is the time limitation. A person without dependents can only continue COBRA coverage for a maximum of 18 months. If you are divorced with dependent children and you had health insurance through your ex-spouse's employer, you can elect COBRA coverage for up to three years. If you are disabled, you can apply for an extension of the 18-month time limitation. If approved, COBRA limits the disability extension to an additional 11 months.

    Cancellation of Group Plan

    • When contemplating whether to elect COBRA coverage, people should think about a few other considerations outside of cost and time limitations before making a final decision. One consideration should be the financial state of the employer. If a company is having financial difficulties or if it is has filed for any type of bankruptcy, there is a good chance it may cancel its group health insurance to save money. If your former employer cancels its group insurance policy or goes out of business, it cancels your COBRA insurance as well.

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