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What Is COBRA Insurance?

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UPDATED: Mar 28, 2020

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cobra

In 1986, the Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed by Congress, allowing for the continuation of certain employer-sponsored health insurance benefits.

Prior to the passage of COBRA, individuals and their families were subject to the loss of health insurance benefits when they left or were fired from a job.

Who qualifies for COBRA insurance?

COBRA insurance provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at the same group rates they had prior to an event that caused their original benefits to cease.

However, COBRA insurance is only available when coverage is lost due to certain specific events, including:

– Voluntary or involuntary termination of the covered employee’s employment for any reason other than gross misconduct – as long as you are not fired for doing something over-the-top against the rules of your organization, you should qualify.

– Reduction in the hours worked by the covered employee – if you no longer qualify for your employer sponsored program because you went from full time to part time (usually under 32 hours per week), COBRA insurance may be your best option.

– Divorce or legal separation of the covered employee – if your spouse was on an employer sponsored program and you separate, you won’t be out of luck when it comes to benefits.

– Covered employees who become entitled to Medicare

– Death of the covered employee – your spouse and dependents will be able to continue benefits in the event of your death.

COBRA can be an important stopgap insurance in times of personal or global emergency, such as during the current coronavirus pandemic.

How much does COBRA insurance cost?

The one drawback to COBRA insurance is that it’s typically much more expensive than your employer sponsored group benefits were because your employer doesn’t pay “their portion” anymore.

Employer sponsored health insurance is cheap because your employer normally pays a certain percentage of your benefits, which greatly reduces your individual cost of coverage.

Even though COBRA insurance benefits may be more expensive than you former employer group cost, you may find it to be less expensive than what you would pay in the “open market.”

But be sure to shop around!  But this may all change as a result of the recent healthcare overhaul passed by congress in 2010.

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How long do COBRA insurance benefits last?

While there are circumstances that allow COBRA insurance benefits to extend up to 36 months, the period of coverage is 18 months.

Qualifying for benefits for 36 months usually requires a second qualifying event to take place while you are already receiving the initial benefits.

You must typically apply for benefits within 14 days of a qualifying event.

Keep in mind that the scope of this article does not include all of the nuances for benefits election periods and qualification.

Be sure to speak with your employer or contact the Department of Labor to get the full details for your unique situation.

COBRA and the Affordable Care Act

Now that the Affordable Care Act (ACA), also known as Obamacare, is live, you may be wondering how it affects your COBRA coverage.

First off, COBRA coverage counts as “minimum essential coverage” or “qualifying health coverage,” so you won’t be docked by Uncle Sam for having inadequate healthcare coverage.

Additionally, losing job-based health insurance coverage qualifies you for a Special Enrollment Period, meaning you can switch to a Marketplace plan even if not during the Open Enrollment Period.

So if you find that COBRA is pricey, you may want to shop other plans. Just be sure to do it quickly as you only get 60 days to enroll following the date of the qualifying event.

Read more: Can I get health insurance without a job?

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