COBRA: What is it? How does it work?

COBRA, known in full as the Consolidated Omnibus Budget Reconciliation Act, allows qualified workers to continue employer-sponsored health care coverage most commonly for 18 months after they leave their job.  If you meet the eligibility requirements, you have the COBRA option whether you quit, are terminated or if you are laid off.

To continue your coverage with COBRA you must pay the full cost of the policy.  This includes you and your employer’s contribution to the monthly premium plus a two percent administration fee, which can lead to some high premium bills each month.

Sounds expensive, so is it worth it?

The cost of COBRA is typically very high, and individuals can likely find individual health care policies for a lower price. However, COBRA is a good option for people with pre-existing conditions who may be denied coverage through other plans, or for someone interested in continuing with the same coverage they had through their employer. While health care reform will make it easier for people with pre-existing conditions to obtain coverage, COBRA will remain an important option to consider.

So any worker who quits or is terminated is eligible?

Not exactly. You must meet several requirements. The fine print says a former employee is eligible as long as:

  • They worked at a company with 20 or more employees.
  • Their position did not end as a result of gross misconduct.
  • They were enrolled in their employer’s sponsored health care coverage during employment.
  • The employer does not reduce or change policies after the employee’s departure.

Are there other instances where COBRA could be an option for me?

  • Employees are eligible if they are still employed, but their hours are reduced to the point where they cannot receive health care coverage.
  • Employees are eligible if they were on qualified medical leave, and must remain away from work beyond the 12 weeks of leave employer’s are required to provide by law.
  • Dependents, including spouses and children, are eligible for coverage as long as they meet the requirements laid out in the health care plan.

If you need help determining your eligibility for COBRA, contact your employer’s human resources department or a customer service representative at your insurance company.

Want to learn more about COBRA? To ask questions and see answers, visit Health Insurance Central.


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