COBRA Insurance Pitfalls

2006-09-28

Health insurance is one of the possible benefits that people get from their employers. It is, likewise, one of the factors that people consider when taking a job. In the United States, employees are given the choice to stay with their employer’s health insurance provider from their company. Family members of the employee, including children, spouses and former spouses, may also qualify for coverage even after employment has been discontinued. This privilege was brought about by U.S. congress passage of the health insurance coverage provision in the 1986 Consolidated Omnibus Budget Reconciliation Act (COBRA). Under this piece of legislation, employers who have 20 or more personnel are obliged to make this offer to its employees.

Employees who opt to continue their coverage after leaving their company would have to pay for 102% of the policy premium. That would include the amount that the employer originally subsidized during the policy holder’s term of employment. Those who are considered eligible for coverage would be entitled to the same options and benefits that the rest of the company employees receive.

It is common perception that applying for continued coverage under one’s former employer would entail the same expenses. However, that is not always the case. People who are thinking of availing of their company’s health coverage, even after leaving their job, would have to think of the charges that they themselves would have to pay for; charges that were initially cushioned by the company budget.

People would also have to think of what is best for them and not make impulsive decisions simply because most of their peers have availed of COBRA coverage. It can be unwise to spend money because of pressure coming from the norm. When it comes to making decisions about investing in one’s health, personal conditions and life situations should be given ample considerations. Remember that each person is unique and there are corresponding benefits and health policies that suit their differences. Income, assets, work history and a detailed presentation of personal medical conditions are just some of the aspects that should be evaluated.

Furthermore, provisions in the contract and benefits should be well defined to avoid any hassle in staking a claim when the need arises. For example, make sure you know what facilities COBRA covers. There are different categories that fall under the term “facility” (e.g. adult day-care center, assisted living-facility), thus it is advantageous to know what benefits are applicable to your situation. Look up what benefits are available in your area, as services and rates tend to change from state to state. So, if you are thinking of relocating but still want to be enrolled under your former employer’s health coverage plans, then location and corresponding services offered are matters to be considered carefully.

Being well informed about the options available to you is always a good strategy. Knowing the details about how COBRA works and how to qualify for eligibility, as well as comparing and contrasting it with premiums of other health options such as Medicare or Medi-Cal, can help a person plan for potential changes and expenses in financial expenses.

Deadlines are another thing that one has to keep in check. Missing deadlines for applications, payment of premiums and maintenance of the policy could cause unwanted and unnecessary disruptions in service. The law does dictate a required 30-day allowance to be granted to policyholders who have had their insurance plans cancelled due to late premium payments. They can make the payments within that given grace period. Reinstatement of the policy would then be granted once payment has been settled within the time frame. However, this can be tricky and cause a sense of insecurity in having your and your dependents’ health covered at all times. What if you suddenly experience a medical emergency and need to get treated during the grace period? How will you handle that situation?

Employers are not exempt from experiencing certain difficulties while administering COBRA to its former employees and their dependents. Sometimes, the variety of needs of COBRA enrollees becomes quite challenging for the employer to manage. Small claims made by past employees as opposed to current members of the workforce, tend to add up to a considerable amount, with the ratio of claims being higher than the actual premiums paid for. Companies are then prompted to come up with ways to minimize cost and save money. Examples of company health benefit changes include elimination of conversion options, development of a longer waiting period on certain benefits (starting from an employee’s date of hire), and introduction of alternative medical plans that reduce premium rates significantly.

As with any purchase an individual makes, it is best to investigate, read the fine print and explore alternatives. After all, what may have worked for someone you know may not necessarily is what is right for you and your dependents’ health.

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