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Rules for Cobra Health Care

The Consolidated Omnibus and Budget Reconciliation Act (COBRA) is a temporary insurance program created for those who recently left their jobs or were fired or laid off. Passed by the U.S. Congress in 1986, COBRA grants workers the right to continued employer-based coverage for a limited period after their employment ends. Although expensive, COBRA is a comprehensive plan requiring no medical underwriting.

  1. Qualification Rules

    • Anyone previously insured through an employer who loses her job for any reason except gross misconduct is eligible for COBRA coverage if she applies within two months of job loss. Unlike individual health insurance, COBRA has no medical underwriting, meaning applicants cannot be denied coverage or rated higher and for more costly premiums because of pre-existing conditions. Those who lose their parent’s insurance due to the parent’s death or loss of child status are eligible as well as recently divorced or widowed spouses.

    Payment Rules

    • Employers usually pay a percentage of their workers’ employer-based plans. Although COBRA is employer-based, the worker must pay the full cost of insurance. Since there is no underwriting, the healthiest enrollees pay the same amount as those with pre-existing conditions. As of 2010, COBRA cost, on average, more than $400 monthly, but federal subsidies are available for low and medium-income people who lost their jobs between September 1, 2008, and May 31, 2010. The Internal Revenue Service (IRS) also allows tax deductions for medical expenses above 7.5 percent of the adjusted gross income.

    Duration Rules

    • COBRA lasts up to 18 months but enrollees can opt for a shorter enrollment period. Enrollees cannot extend the duration past 18 months unless they become disabled during the first 60 days of coverage. To qualify for a disability extension, they must provide an official disability ruling from the Social Security Administration before the end of 18-month period of coverage.

    Termination Rules

    • Excluding four instances, COBRA cannot cancel a policyholder’s coverage. Those instances are an enrollee’s failure to pay premiums, an employer’s cessation of the group health plan and enrollment in Medicare or another employer-based group plan after COBRA election.

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