Prior to 1986, a full-time employee lost health insurance benefits provided by an employer if he lost his job or if his hours were reduced--and so did a spouse and children covered by the plan. This changed when the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) passed. COBRA gives an employee the option to get continuation coverage even after he is no longer eligible for health insurance benefits provided by the employer.
Understanding COBRA Health Insurance
Step 1
Continuation coverage under COBRA isn't just limited to employees--it is extended to anyone covered under the employee's health plan. Spouses and children who are covered by the plan are eligible for continuation coverage in the event that an employee is terminated or has her hours reduced. Additionally if two spouses divorce or the working spouse dies or becomes eligible for Medicare, the other spouse and children covered under the employee's health insurance plan can elect to keep coverage under COBRA.
Step 2
Continuation coverage is no longer paid for by the employer--premium payments are made by the individuals who elect to keep the coverage. According to the Department of Labor, if you qualify for continuation coverage under COBRA, you may have to pay the cost of the premium for up to 102 percent of the cost of the plan. If COBRA continuation coverage is extended, the cost of the premium may go up to 150 percent of the plan's cost.
Step 3
Continuation coverage under COBRA is only temporary. The DOL notes that COBRA health insurance generally lasts for 18 months. However, you may qualify for another 11 months of continuation coverage if you become disabled within the first 60 days of the coverage, as determined by the Social Security Administration. To extend coverage, you must send a copy of the SSA's ruling to the insurance plan administrator before the 18-month period lapses.
Step 4
The option to keep COBRA continuation coverage must be exercised within a certain time frame. Employers are required to inform anyone covered by the worker's health insurance of a "qualifying event" (such as termination of the employee or the employee's death) no later than 14 days after the insurance plan administrator is notified. Those covered by the health insurance, including the employee, spouse and children, have 60 days in which to elect to continue the coverage and 45 days in which to pay the first premium.
Tips and Warnings
- If you qualify for COBRA continuation coverage, you must be offered the same benefits as you had before the qualifying event took place.
- COBRA generally applies to employers with 20 employees or more, notes the DOL. Smaller employers may not offer continuation coverage to employees after a qualifying event.
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