President Reagan enacted the Consolidated Omnibus Budget Reconciliation Act in 1986. Commonly referred to as COBRA, the law enables employees to continue health insurance following a job loss or other qualifying circumstance. Applying for the coverage is not difficult.
• Individuals must first determine if they qualify for coverage. The employee must have previously been covered under a group health plan offered by their employer. The plan must also have covered at least 20 employees. If a former employee was covered by an individual policy that was not part of a group plan, they do not qualify for COBRA.
• Employees qualify for COBRA if they suffer a reduction in work hours, voluntarily resign or retire from a previous position. Employees also qualify if they were involuntarily terminated as long as the event was not due to gross misconduct. An employee's family qualifies for the coverage in the event that the employee died.
• If an employee goes on Medicare, they are no longer eligible for COBRA coverage. However, dependent children are still eligible for coverage. Family members may also apply regardless if there is a divorce or a child who has reached the age of adulthood.
Review COBRA Coverage
An employee typically receives the option of continuing insurance through COBRA within two weeks of the insurance company being notified of the qualifying event. The document supplies all of the pertinent information related to the insurance coverage and cost. Employees must remember that their former employer paid a percentage of coverage for each employee under the group plan. Under COBRA coverage, the employee now carries the full burden of the cost. Individuals must consider whether other options might be more financially beneficial.
If an employee is satisfied with the plan and cost, they need merely return the signed application to the insurance company within two months of receipt. The first premium may be required 45 days after coverage onset. Individuals are given a 30-day grace period if the first payment is not received at the predetermined time. If the company does not receive a payment after that date, the coverage is terminated.
Extent of Coverage
Individuals receive the same level of coverage that was formerly provided under the group policy. However, COBRA policies only provide coverage for up to 18 months for employees that endured hourly reductions or a job loss. Some types of events may extend the coverage for up to 36 months. Coverage ends if an individual does not keep up with premiums, opts for Medicate coverage or decides to initiate a different policy. COBRA coverage may also end if the employer discontinues the group health plan.