What are COBRA Medical Benefits?

The average annual health insurance premium in the United States is $8,500, a sum that for many is covered by a person and his employer. Before 1985, when people lost their insurance, that would be it--there would be no access to coverage. Title X of the 1985 Consolidated Omnibus Budget Reconciliation Act mandated that access to health insurance be offered whenever someone loses his job or health coverage.

History

• The recession of 1981 and 1982 caused millions of Americans to lose their jobs. Increased costs put health insurance out of reach for many. Provisions of the 1985 Consolidated Omnibus Budget Reconciliation Act made it so people could pay 102 percent of the premium of their employer's group coverage--the extra 2 percent represents an administrative fee charged by the plan's administrator--to keep their insurance for a period of time should they lose coverage. The act's acronym, COBRA, stuck as the colloquial name for the plan.

Terms

• The COBRA legislation provides that any person who purchased insurance from her employer be offered access to that same coverage after the end of her employment, be it the result of resignation, layoff or firing. The person must make a monthly payment to the provider, most likely the employer, in advance for the next month of coverage. A person has 45 days from her last day of coverage to accept or decline COBRA and can purchase the insurance only for a certain period of time, typically 18 months. The person buying COBRA insurance receives the same benefits as when she was employed and is subject to the same deductibles or co-payments attached to the plan. The only difference is that rather than an employer contribution offsetting the premium, the person buying COBRA foots the entire cost.

What Is and Isn't Available

• COBRA applies to group health coverage, in which payments are made to health providers or other entities such as pharmacies or health-supply companies. COBRA permits a person to purchase health, dental, vision or prescription coverage as offered by the employer. For instance, if the employer offers health and prescription but not dental and vision, the person can purchase only health and prescription coverage. COBRA does not extend to group-purchased disability, cancer or life insurance plans.

Restrictions

• Not every company is required to offer COBRA. Companies with fewer than 20 employees are not obligated by law to provide COBRA, as well as the federal government, churches or other houses of worship, and religious organizations. Local and state governments are not exempt from offering COBRA.

Eligibility

• There are three primary events that allow people to qualify for COBRA benefits. The first, and most common, is the loss of a job, whether through layoff, termination or resignation. Under COBRA, a person can purchase coverage for him and his family for as long as 18 months. The second comes from the death of the primary person insured. The spouse and children of the deceased can buy coverage for as long as 36 months. The last is what is called loss of dependent child status. This occurs when the insured's child reaches 18, graduates from college or, if the child is still in school, turns 25. Under these conditions, the insured can purchase COBRA for his child for as long as 36 months.