What is COBRA health insurance?
The Consolidated Omnibus Budget Reconciliation Act (known as COBRA) is a federal law that was passed in 1986. COBRA requires employers to offer some employees a temporary extension of their health insurance coverage after the employee terminates employment. You can think of it as a bridge between employee-provided health care coverage and a former employee’s future health insurance plan–but you’ll typically maintain your same plan (so, if you had an HMO through your employer, COBRA allows you to keep that same HMO plan).
COBRA health coverage is only extended to employees after certain “qualifying events,” such as retirement, job loss due to anything besides gross misconduct, a reduction in work hours, death of the covered employee, divorce or other life events that force individuals to lose their health coverage. Depending on the qualifying event, those affected by the insurance loss will receive different levels of coverage for different time intervals.
Who is eligible for COBRA?
Typically, state or local government agencies, employee organizations, and companies with 20 or more full-time employees are subject to COBRA. In order to receive COBRA coverage, you must have been enrolled in your company’s insurance plan while you were employed.
In addition to offering you coverage, your employer is required to offer it to those who were covered under your plan before your qualifying event. Beneficiaries may include spouses, former spouses and dependents. Children placed for adoption with an employee while he or she is receiving COBRA benefits are covered. Agents and independent contractors who participated in the group health plan and experienced a qualifying event may also qualify as beneficiaries.
COBRA beneficiaries usually are eligible for group coverage for 18 months. Certain qualifying events, or a second qualifying event during the initial period of coverage, may allow you to extend coverage for up to 36 months. For example, disability recognized by the Social Security Administration warrants coverage that may last up to 29 months. And a former spouse may receive continued coverage for up to 36 months.
How much does COBRA cost?
COBRA provides coverage at group rates–and most insurance companies offer group medical insurance rates at a big discount compared to individual rates. Insurance companies can give groups a better deal on premiums, because the risk to the insurance carrier is spread over a bigger group of people.
Group health coverage for COBRA participants, however, is often more costly than health coverage for regular employees, since the company usually pays a part of the premium, while COBRA participants generally pay the entire premium themselves (up to 102% of the cost of the plan). In some cases, when participants get their benefits extended due to disability, they may have to pay up to 150% of the premium.
Former employees can also opt out of more expensive kinds of COBRA coverage. For instance, they could choose continuation coverage under a plan that only covers the worker but not his dependents, or that only offers medical and hospitalization coverage and does not pay for dental work – if those options are available to covered employees.
It may be worth shopping around for a new plan, but you should consider all of your options. If your family income is still high after losing your job, you may not be eligible for premium assistance–in which case COBRA may be your best bet. Either way, you should make sure you’re covered–health care is expensive, whether it’s having a baby or an unexpected trip to the emergency room.
What are the other options besides COBRA?
It’s helpful to search the Health Insurance Marketplace for alternatives to COBRA. If you suddenly lose your health benefits, you’re eligible to buy a Marketplace insurance plan, even after the open enrollment period closes. By using the Marketplace, you can determine if you’re eligible to get premium tax credits and lower out-of-pocket costs, which depend on your income.
Through the Marketplace you’ll also learn if you qualify for free or low-cost coverage from Medicaid or the Children’s Health Insurance Program. Keep in mind that Medicaid and other similar programs are usually only available to people with very low incomes and limited assets. Also consider that some doctors do not accept Medicaid patients.
You can also use the Marketplace to research the individual plans offered by private companies. You may find that based on your household size and income you qualify for more affordable coverage than your company’s COBRA plan. To learn more about shopping for health insurance through the Marketplace, get your personalized health insurance guide.
Call 888-959-3788 today to purchase your affordable alternative to COBRA today!!!