What Is COBRA Insurance Coverage?

The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, among other provisions, gave employees and their families who had lost their healthcare benefits the option to extend them. The COBBRA provisions apply to group health care plans that had at least 20 employees enrolled during the previous calendar year. However, plans controlled by some church organizations and the federal government do not qualify for COBRA coverage.

Definition

• The purpose of the COBRA program is to provide a continuation of health insurance when some other factor has caused the termination of the employer group coverage. COBRA is a temporary health coverage that is charged to the individual at a group rate. It is designed to bridge the need for health coverage between jobs.

Eligibility

• An individual must have been enrolled in an employer’s group health insurance in order to qualify for COBRA coverage. An employee becomes eligible for COBRA coverage when an event causes the termination of the employer’s group coverage. Layoff, loss of hours, voluntary or involuntary termination are all triggers that would make an employee eligible for COBRA coverage. Family members of an employee can elect COBRA coverage as well in the event that the employee who carried the health insurance coverage dies.

Time Frame

• When electing to use COBRA health coverage it must be activated within a specified time frame. The plan administrator of the COBRA health plan must be notified by the employer within 30 days of the event that qualifies the employee for coverage. The COBRA plan administrator will send out an information packet to the qualified individual within 14 days of being notified. The qualified individual then has 60 days to determine whether or not to elect the use of COBRA coverage. If coverage is selected, the first premium must be paid within the first 45 days or coverage will be canceled.

Coverage Duration

• COBRA coverage is designed to be a temporary solution to bridge the health care gap between jobs and keep people covered. Eighteen months is the normal length of time that COBRA coverage can be used. Extended coverage is available for individuals who were determined to have become disabled within the first 60 days of using the COBRA Health plan. However, the premiums during the extension period can be increased. If an individual fails to pay the premiums on time, the COBRA coverage will be terminated as soon as the policy has become past due.

Considerations

• The cost for the COBRA Health plan is determined by the cost of the group health insurance carried by the employer. Under the COBRA plan the individual is now responsible for both portions of the premium, meaning that he must pay the portion of the premium he paid as an employee, if any, and the portion that the employer had paid as a benefit to the employee. For this reason some younger and healthier individuals may find coverage through private plans more affordable than the premiums required through the COBRA plan. However, until that part of the Healthcare Reform Bill takes effect in 2014, individuals with pre-existing conditions may still be denied coverage by private insurance companies.