In 1986, Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA). This law amended the Employee Retirement Income Security Act, Internal Revenue Code and the Public Health Service Act so that health insurance provided to an employee and his beneficiaries could be extended after a "qualifying event," such as termination of employment, reduced hours, divorce, death and other circumstances. If you or a family member received health insurance through your employer and such a qualifying event took place, you may be eligible for COBRA continuation coverage.
COBRA Insurance Basics
Step 1
Assess your eligibility as an employee. As noted by the Department of Labor, private sector employers with at least 20 employees generally offer COBRA continuation coverage in the event that you quit your job or were terminated from your position (with the exception of termination for gross misconduct) or if your hours are reduced. In certain circumstances, you may be eligible for COBRA continuation coverage if you retire.
Step 2
Determine your eligibility as a spouse (or child). Spouses of a full-time worker and any children covered by a health insurance plan at the time of a qualifying event are also eligible for COBRA continuation coverage. If you separate from or divorce your spouse and you're covered by his health insurance plan at the time, you can elect to keep the health insurance under COBRA, as can children who were covered by the plan. Similarly, if a working spouse dies or becomes eligible for Medicare, you can seek continuation coverage for yourself and dependent children.
Step 3
Make sure that you receive an election notification within the required time frame from the health plan administrator. By law, if you're eligible for COBRA continuation coverage, the plan administrator must inform you within 14 days of receiving notice of the qualifying event from the employer.
Step 4
Act within the election period to get COBRA coverage. Individuals who qualify have 60 days in which to elect to keep the coverage. If you initially decide to waive coverage under COBRA, you can revoke the waiver, as long as you do so within the 60-day election period. Your coverage begins on the date your waiver is revoked and is not retroactive.
Step 5
Pay the first premium within 45 days. The Department of Labor notes that this can be as much as 102 percent of the cost of the plan, but the cost cannot exceed this amount. If you elect to keep your health insurance under COBRA, make sure to make premium payments on time--if you don't, your coverage may end.
Tips and Warnings
- Most people who qualify for continuation coverage under COBRA receive benefits for a maximum of 18 months; however, there are certain qualifying events (such as divorce) that may extend benefits for up to 36 months. If a beneficiary becomes disabled during the first 60 days of continuation coverage, it can be extended for an additional 11 months. A rulings letter from the Social Security Administration must be provided to the plan administrator before the date continuation coverage terminates.
- COBRA continuation coverage may seem expensive, but the Department of Labor notes that the premiums you pay for this coverage are still considerably less than the amount you'd pay for an individual policy that provided the same or similar benefits.
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