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Cobra Insurance Rules

The Consolidated Omnibus Budget and Reconciliation Act, or COBRA, is a federal law that regulates the continuation of group health insurance. COBRA applies when an individual loses his group health insurance coverage because of job loss. This means that an individual has the option of keeping her health insurance coverage from her former employer. However, there are specific insurance rules that apply for COBRA coverage.

  1. Retroactive Coverage

    • Individuals who do not enroll in COBRA during the initial election period will give up their right to receive coverage. However, if an individual decides to enroll before the election period expires, he can still receive coverage under COBRA. This means that coverage will be retroactive back to the first day an individual no longer worked for his employer. An individual will need to pay all retroactive premiums first before coverage will start.

    Premium Payments

    • When an individual is eligible for COBRA, she will receive a packet of information with an election form and the amount of premium that is due. Depending on when the person receives the election form, he has 45 days to pay the first premium that is due. The initial premium may be high because it includes coverage from the date the person lost her job. When an individual has a payment due, she gets a 30-day grace period for payment after the due date.

    Short Payment Rule

    • When an individual makes a payment for COBRA that falls short of the full amount, the COBRA plan administrator must accept the shortfall payment as payment in full. The payment needs to be short by an insignificant amount ,which is the lesser of 10 percent or $50. The plan administrator also has the option to send a notification about the shortfall and allow another 30 days from receipt of the notification to make the remaining payment.

    Notification Rights

    • COBRA is a federal law, which means coverage notification falls under the jurisdiction of the U.S. Department of Labor. If an employer fails to send a COBRA notice in a timely manner as stated by law, the employer can be fined up to $110 for each day a notification has not been sent. The government also may levy an excise tax against a company that fails to comply with COBRA rules.

    Conversion Plans

    • Many group health plans are required to allow an individual currently under COBRA to convert to an individual policy. An employer or COBRA plan administrator needs to provide an individual with the conversion option within 180 days before coverage for COBRA ends. However, whenever a conversion to an individual policy occurs, the insured will need to pay the higher rates that are applicable for an individual policy.

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