Health insurance through the Consolidated Omnibus Budget Reconciliation Act permits qualified beneficiaries to temporarily retain health insurance and applicable premium insurance rates normally provided through an employer after a qualifying event has taken place. Qualified beneficiaries include employees, their spouses and children. Qualifying events that make beneficiaries eligible for COBRA health insurance are a voluntary or involuntary termination of the employee's job (except for gross misconduct), reduction in the employee's hours, the employee becoming eligible for Medicare benefits, the employee's death, and divorce or separation of the employee.
Step 1
Ascertain the monthly premium the employer paid under the group plan. If you were an employee, your employer may have paid 100 percent of your premium or sometimes only a percentage of the premium, notes the U.S. Department of Health and Human Services. If you're unaware of your monthly premium, this amount will be specified in the election notice sent to you by first-class mail within 14 days after the plan administrator receives word of a qualifying event.
Step 2
Keep in mind that the cost of monthly premiums under COBRA continuation coverage is usually paid solely by the qualified beneficiary who elects to keep the coverage. The U.S. Department of Labor notes that some employers will subsidize COBRA insurance rates. However, in most cases, the qualifying beneficiary pays the total cost of the premium. Costs cannot exceed 102 percent of the premium. (A 2 percent administrative fee may be applied to the cost of the premium.)
Step 3
Be aware of circumstances when COBRA insurance rates may exceed 102 percent of the cost of the premium. One such circumstance is when a qualified beneficiary applies for an 11-month extension of continuation coverage due to a disability experienced within the first 60 days after the coverage takes place. In this case, the cost can increase to 150 percent of the premium.
Step 4
Find out if you're eligible for reduced COBRA insurance rates under the American Recovery and Reinvestment Act of 2009. This act makes certain qualified beneficiaries eligible for a 65 percent reduction in COBRA premiums for up to nine months if the qualifying event was an involuntary job loss that took place between Sept. 1, 2008 through Dec. 31, 2009 (see the Resource section).
Tips and Warnings
- The Department of Labor notes that the cost of COBRA insurance rates may increase if the cost of the plan goes up. However, premiums must generally remain the same for a 12-month cycle. COBRA continuation coverage is only temporary, lasting between 18 and 36 months depending on the beneficiary's circumstances (see the Resource section).
- The Department of Labor and the Department of Health and Human Services warn that the cost of COBRA insurance rates may seem expensive; however, to receive the same type of coverage under an individual health insurance plan, the qualified beneficiary would have to pay a much higher premium.
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