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What Does COBRA Mean in Medical Insurance?

The Consolidated Omnibus Budget Reconciliation Act of 1985 established the medical insurance option that is more commonly known as COBRA. The premise behind the measure was to give departing employees the option of temporarily continuing to purchase health insurance through their former employer.

  1. Time Frame

    • COBRA allows departing employees the option of purchasing the same group insurance they held when employed by a company for up to 18 months.

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    Effects

    • The biggest drawback to COBRA is that the former employees are responsible for the entire cost of their medical insurance. Many employers will pay for a portion of the health insurance of their employees.

    Significance

    • COBRA coverage may be extended beyond 18 months in some situations. If a person becomes disabled during the first two months of COBRA coverage, the time period is extended to 29 months for the insured and their qualified beneficiaries. The time frame is extended up to 36 months for those losing their medical insurance due to a spouse's death or divorce.

    Considerations

    • Former employees may be required to pay slightly more for COBRA coverage than the employer pays. Employers are allowed to charge you 100 percent of the insurance costs, as well as an additional 2 percent for administrative charges.

    Misconceptions

    • There are several exceptions to being offered COBRA. Employees terminated for "gross misconduct" or those who work for companies with fewer than 20 employees do not have to be offered COBRA insurance continuation.

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