Lost Your Job? COBRA Lets You Keep Your Health Insurance

COBRA is a United States law that allows covered employees and their families to continue their group health care coverage when faced with a qualifying event that could cause them to lose it. An individual covered by this law is known as a qualified beneficiary.

Examples of qualifying events for employees include leaving or quitting your job or having your hours reduced. The law also allows the spouse and children of the employee to continue their coverage should either of those events take place or if the covered employee dies or becomes eligible for Medicare. Additionally, it includes protection for the employee's spouse if they would lose insurance benefits due to divorce. COBRA, which Congress passed in 1986, stands for Consolidated Omnibus Budget Reconciliation Act.

Why You Need to Understand Your Rights Under COBRA

The group health insurance your employer offers can keep you from financial ruin should you or one of your dependents become ill. If you lose your job, or some other event threatens your coverage, it is important that you know about COBRA and how it can protect you.

Group health insurance is one of the most valuable components of your compensation package. Some employers pay the entire premium, but many require employees to pay a portion and sometimes even the entire thing. In any case, participating in an employer's group insurance plan is almost always cheaper than paying for an individual health insurance policy.

When you leave your job, whether you are fired or quit, you shouldn't have to go without health insurance because you can't afford an individual policy. That is where COBRA comes in. It allows you to continue to participate in your employer's group health insurance plan by paying for your policy on your own. Here are answers to some questions you may have.

Are All Group Insurance Plans Subject to COBRA?

Not all group plans are subject to COBRA. Only those plans maintained by businesses and state or local governments with more than 20 employees. Group insurance plans that the United States federal government, churches, and certain church organizations provide for their employees are not subject to it either. The federal government offers something similar for its employees, however.

Does COBRA Protect You and Your Family?

If you or your family has a qualifying event, like losing your job for any reason other than gross misconduct, quitting your job, or your employer reducing your hours, dying, or getting a divorce, and you answer "yes" to any of the following questions, you are probably eligible for COBRA:

• Do you work for a private-sector employer or state or local government with 20 or more employees?
• Are you covered by the group health insurance plan provided by your spouse's or parents' private sector or state or local government employer?
• Were you or your family covered by a group health plan on the day before the qualifying event occurred?

Reasons to Elect Continued Coverage Through COBRA

You should opt to continue your group health insurance benefits when:

• Your plan is better than other plans that may be available.
• You or your dependents won't have coverage without it.
• You are satisfied with your plan and your health care providers.

Reasons You Should Elect to Not Continue Your Coverage

You shouldn't use COBRA to continue your coverage if:

• You can get coverage from the employer of one of your parents or your spouse.
• You find a better plan through the Health Insurance Marketplace.

You should note that while under other circumstances you must wait until an open enrollment period to sign up for a health insurance plan, HIPAA, the Health Insurance Portability and Accountability Act, provides an opportunity for those who have lost eligibility for coverage to enroll during other times. This is called special enrollment.

How Much Will You Pay to Continue Your Coverage?

The amount you will pay for your insurance premiums depends on the cost of the plan. You will not pay more than the combined cost the employer and an employee pay for the same policy (plus 2% for administrative costs).

3 Things That Should Happen After a Qualifying Event

1. Your employer must notify its health insurance plan within 30 days of your employment ending, a reduction in your hours, or your death.
2. Once it receives notification, the plan must then send an election notice to you and other qualified beneficiaries within 14 days of receiving notification from your employer. It will explain your rights and tell you how to elect to continue your coverage.
3. You will have 60 days from the date you received your election notice or the date your coverage ended to elect to continue your coverage.

How Long Can You Continue Your Coverage?

You and your family can elect to continue insurance coverage for at least 18 or 36 months depending on the qualifying event. If you fail to pay your premium, or you begin coverage under another group plan, your coverage will end. If at any time your former employer no longer provides a group health insurance plan to employees, you will no longer be able to participate. 

Where to Get More Information About COBRA

Individuals who work for private-sector employers should contact the Employee Benefits Security Administration, a division of the U.S. Department of Labor. Either call toll-free (866) 444-3272 or visit the EBSA website. 

If you work for a state or local government, you should contact the Centers for Medicare & Medicaid Services at 1-877-267-2323, option #6, extension 61565, or phig@cms.hhs.gov.