COBRA is a federal law that allows employees and their families to temporarily continue coverage under employer-sponsored health insurance plans in certain circumstances. Therefore, if you are facing a job loss, death of a spouse, or divorce, all of which may change your eligibility for health insurance coverage, you should find out if you are eligible for COBRA benefits.
COBRA generally applies only to state and local government employers, as well as to private employers which employed 20 or more part-time or full-time employees during the prior year, and that provide a group health insurance plan to their employees. Additionally, COBRA benefits are available only to certain people, or “qualified beneficiaries,” a category that includes an employee, the employee’s spouse, and the employee’s dependent child(ren). Under some circumstances, COBRA benefits may also be available to retired employees, along with their spouses and dependent child(ren), as well as independent contractors who participate in a group health insurance plan. In order to fall within any category of qualified beneficiary, you must be a participant in the employer’s group health insurance plan.
It is important to know that COBRA benefits are available to qualified beneficiaries of covered employers only in very specific circumstances, which are called “qualifying events”. The type of qualifying event determines which people are qualifying beneficiaries, how long people have to enroll in COBRA benefits, and how long COBRA benefits are available to them. For instance, for employees, qualifying events include lay-offs or termination, except in cases of gross misconduct, or a reduction in an employee’s hours. For employees’ spouses and dependent children, qualifying events are the same as for employees, but also include an employee becoming eligible for Medicare benefits, divorce or legal separation, or death of the employee.
COBRA benefits can last anywhere from 18 to 36 months, depending on what type of qualified beneficiary you are, and what type of qualifying event has occurred. For instance, in the case of a job loss, COBRA benefits typically are limited to 18 months. In the case of an employee’s spouse who has lost coverage due to a divorce, however, COBRA benefits can extend up to 36 months.
If you are eligible for COBRA benefits, you should know that you will be responsible for paying up to 102% of the entire premium of the health insurance plan coverage, which normally will be more expensive than what an employee enrolled in the plan would pay. However, COBRA benefits, at least on a temporary basis, are likely to be less expensive than buying an individual health insurance plan, or going without health insurance coverage altogether. Plus, the newly passed American Recovery and Reinvestment Act of 2009 does provide benefits under COBRA at a reduced rate for certain persons who have lost health insurance coverage due to a lay-off that occurs between the dates of September 1, 2008 and December 31, 2009. Eligible persons may be entitled to pay reduced premiums for continued health care coverage at a rate of only 35% of the normal plan premiums.
For more detailed information about COBRA and eligibility for benefits under COBRA, you can contact the U.S. Department of Labor by calling 1-866-444-3272 or visiting the DOL website.