COBRA Coverage

You likely know that if you are laid off from a big company, you will be offered COBRA health insurance benefits after your departure. That may be all you know about COBRA coverage. Here is a chance to learn much more.


Many more businesses offer COBRA coverage than you may think. The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 stipulates that any employer with 20 or more employees and a group health plan must give ex-employees an option of continuing the health insurance they had while working for another 18-36 months. So, as you can see, many large and small businesses have a legal obligation to tender COBRA coverage.


Can you get COBRA coverage after being fired? Contrary to what some people think, that is possible. COBRA coverage is prompted by a qualifying event: a layoff, a decision to quit, a reduction to part-time hours, an involuntary termination of employment, even a company bankruptcy. (There are other qualifying events beyond these.) An employer can fire you and deny you COBRA benefits on the grounds of “gross misconduct,” but COBRA does not really define what gross misconduct is. (It cites a willful offense against an employer as one example.) If the employer cannot show that gross misconduct on your part led to your firing, your involuntary termination should be followed by an offer of COBRA coverage.


One other thing to note: if you take a job at a company with 20 or more employees and a group health plan, and you are enrolled in that group health plan just one day before a qualifying event occurs, you automatically become a qualified beneficiary and your employer must extend an offer of COBRA benefits to you. (By extension, COBRA benefits must also be offered to your spouse or domestic partner and your dependents.)


If you are enrolled in Medicare, your former employer has no requirement to offer you COBRA coverage. Former employees who were ineligible for or never participated in an employer’s group health plan are also unentitled for coverage.


How do you arrange the benefits? You must fill out and return your COBRA enrollment forms within 60 days of receiving an eligibility notice. Miss that 60-day deadline, and your eligibility for benefits disappears


COBRA benefits do not come cheaply. Federal law gives your ex-employer the option to raise your plan premium by 102% during the initial benefits period and by 150% in months 18-29. This is often what happens.


Under these conditions, you are paying your employer’s share of group health premiums as well as your own, plus an administration fee. It is your responsibility to pay the premiums and keep the insurance in force. Your coverage may be canceled if you are more than 30 days late with a premium payment.


Does the standard COBRA coverage period last 18 months? Yes. If you quit, are let go, or have your hours reduced from full time to part time, then the term of coverage may last up to 18 months. If any other qualifying events lead to COBRA coverage, the benefits may continue for up to 36 months.


COBRA usually extends all the group health benefits your employer sponsored. For example, if your old plan offered health, vision, and dental coverage along with a medical spending account, all that should be offered to you under COBRA. Your former employer has no obligation to continue any life or disability insurance coverage through COBRA.


Some states have their own mini-COBRAs. In certain states, businesses of all sizes must comply with these laws.


Divorcing spouses should take a look at COBRA. When an employee enrolled in a group health plan divorces, the plan commonly ends coverage for the ex-spouse. The law defines a divorce as a qualifying event, however, and through COBRA, a divorcing person can stay on an ex-spouse’s group health plan for up to 36 months.

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