COBRA Insurance and Your Options
2006-01-23
The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986 allows employees who leave their employer, their spouses and children, and retired employees to access temporary continuation of their health insurance benefits at the group rates offered by the former employer. Employees who have lost their health coverage due to a reduction in work hours and those who have voluntarily terminated employment are also eligible under the COBRA Act of 1986.
Cost to continue coverage through COBRA hits the wallet hard. Those seeking to continue their health coverage through their former employer under the COBRA plan can expect to pay the full premium plus a 2% administrative fee. The employer no longer pays part of the cost. So, if your employer paid the majority of the cost for you, rates could increase as much as 70% or more.
This means that the portion of your health insurance that your former employer was paying as part of your compensation package is now your responsibility to pay, as is the portion that would normally come from your pay check.
Upon loss of health benefits and if eligible, you will be notified of your rights to participate in the COBRA plan. You have sixty days from the day of lost coverage to begin participation in a COBRA plan. After sixty days, your options will be forfeited.
The law applies to those who worked for employers in the private sector, state, and local governments who had twenty or more employees for 50% of the workdays in the previous year. The law does not apply to the federal government or certain religious organizations.
Employees and their family members who were covered by health insurance prior to the loss of benefits are qualified to continue benefits under COBRA.
The length of continued coverage under COBRA varies by the dependants and the cause of benefit loss.
18 Months - This is the available coverage period for employees, their spouse, and their dependant children who have lost medical coverage due to separation or reduction of qualifying hours.
36 Months - This is the available coverage period for the spouse and dependent children of an employee who is entitled to Medicare, if there has been a divorce or legal separation or if the covered employee dies. Dependant children who lose their health insurance because they no longer meet the eligibility requirements may also purchase medical insurance under COBRA for this period of time.
Health insurance companies recognize that the expense of a COBRA plan can be difficult to manage and have developed insurance options that may be more attractive and affordable depending on your particular circumstances. These include temporary health insurance, student health insurance, and graduate health insurance.
A qualified health insurance agent who is familiar with these plans and the companies that offer them can provide valuable guidance in deciding if one of these alternate plans is right for you. You can get a free, no obligation health insurance quote at the top right of this page.
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