Understanding COBRA: Continuing Your Health Insurance When It Matters Most
Losing health coverage due to a job change, reduced hours, or other life events can be stressful. That’s where COBRA (Consolidated Omnibus Budget Reconciliation Act) steps in, allowing you and your dependents to temporarily continue your group health plan coverage when it would otherwise end. Here’s what you need to know about COBRA, how it works, and when it applies.
What Is COBRA?
COBRA is a federal law that provides eligible employees and their families the option to continue health coverage at group rates. While the coverage may be more expensive than for active employees (since employers typically cover part of the premium), it offers a safety net during life transitions.
When Does COBRA Apply?
COBRA applies to most private-sector employers with 20 or more employees, including corporations, partnerships, and some nonprofits. It covers health plans providing medical, dental, vision, and other essential care, but not life insurance or disability plans. State and local government plans are also covered, but federal government and certain religious organizations are exempt.
Even if COBRA doesn’t apply, your state might offer “mini-COBRA” laws that provide similar continuation coverage for smaller businesses.
Who Is Eligible for COBRA?
COBRA coverage is available to “qualified beneficiaries” who are enrolled in a health plan the day before a “qualifying event.”
Qualified beneficiaries include:
Employees,
Spouses or former spouses,
Dependent children,
Newborns or adopted children added during COBRA coverage.
Qualifying Events include:
Job termination or reduction in hours,
Divorce or legal separation,
Death of the covered employee,
A dependent aging out of plan coverage.
How Long Does COBRA Coverage Last?
The length of COBRA coverage depends on the qualifying event:
18 months for job termination or reduced hours.
36 months for divorce, legal separation, employee death, Medicare entitlement, or loss of dependent status.
Coverage can sometimes be extended for disability (up to 29 months) or a second qualifying event (up to 36 months). However, coverage ends if premiums aren’t paid, if the employer stops offering a health plan, or if the beneficiary gains other coverage.
Cost of COBRA Coverage
Qualified beneficiaries can be required to pay up to 102% of the plan cost, including the portion previously covered by the employer. For those with a disability extension, premiums can increase to 150% of the plan cost. Payment flexibility is usually offered (e.g., monthly or quarterly), with a 45-day period for initial payments and a 30-day grace period for ongoing payments.
Required COBRA Notices
Employers must provide specific notices about COBRA rights and options:
General Notice: Within 90 days of health plan coverage.
Election Notice: Within 14 days after a qualifying event, explaining COBRA coverage and how to enroll.
Termination Notice: If COBRA ends early, detailing the termination reason and options for alternative coverage.
How to Elect COBRA Coverage
Each qualified beneficiary has a 60-day window to decide on COBRA coverage from the date of the qualifying event or notice. Family members can make separate choices, though a parent or spouse can elect coverage on behalf of dependents. If COBRA is waived, beneficiaries may still revoke the waiver within the election period.
Is COBRA Right for You?
COBRA offers continuity in health coverage during transitions, but it can be costly. Before enrolling, weigh the premium costs against other options like enrolling in a spouse’s plan, state coverage options, or marketplace plans.
