COBRA is the acronym for Consolidated Omnibus Budget Reconciliation Act, passed by Congress in 1986 to provide group health coverage that otherwise might be terminated, according to the United States Department of Labor. COBRA provides the right to temporary continuation of health benefits at group rates to certain employees, their spouses and dependent children, former spouses and retirees when coverage is lost due to certain events such as job loss or reduction in hours. While COBRA allows employees and their families to keep insurance coverage, it does have disadvantages.
High Cost
COBRA insurance is more expensive than health coverage for active employees because COBRA participants usually pay the entire premium themselves, as opposed to the employer paying part of the premium for employees that are actively employed, according to the United States Department of Labor. Individuals receiving COBRA pay the portion of the premium paid while employed, the contribution the employer made while employed, plus an additional 2 percent administrative fee in some cases. Also, payment of insurance is now made by after-tax dollars as opposed to being taken out of your paycheck and paid with pre-tax dollars.
Eligibility Restriction
Only people who were enrolled in their employer's group health plan while employed are eligible to enroll in COBRA. The health plan also must be currently in effect for active employees. Eligibility for coverage is available after a qualifying event, such as loss of employment or reduction in hours. People who were not covered under a group health plan when a qualifying event occurs are not eligible for COBRA.
Availability
COBRA is not a long-term health insurance plan, because it is only available for up to 18 months. If a second qualifying event occurs, COBRA enrollees may receive up to a maximum of 36 months total coverage. An employee must select overage from COBRA within 60 days of losing his current group health coverage through a qualifying event, according to Allcaliforniahealthplans.com. If he fails to enroll during that 60 days, he will not be eligible to enroll at a later time.
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