By: Vicki Lankarge
Sixty-seven percent of Americans under age 65 who have health insurance receive it through an employer. So it's little wonder a fear of losing your job is compounded by a fear of losing your health insurance.
But there is hope. You may be eligible for the continuation of your health insurance benefits through a federal law known as COBRA — short for the Consolidated Omnibus Budget Reconciliation Act.
COBRA provides a vital bridge between group health insurance plans for qualified workers, their spouses, and their dependent children when their health insurance might otherwise be cut off. It's a safety net for families in the midst of crisis, such as unemployment, divorce, or death. Yet many people don't know how COBRA works or where to turn when they encounter problems with the program. Read Know your COBRA rights for full details.
COBRA generally requires that group health plans sponsored by employers with 20 or more employees offer workers and their families the opportunity to temporarily extend their health insurance coverage. But did you know that the law also grants an exemption to the District of Columbia, federal employees, certain church-related organizations, and some firms employing fewer than 20 people? There are many more things you should know about COBRA. Here are another 10.
Certain "qualifying events" trigger 36 months of COBRA coverage for your dependents. Voluntary or involuntary job loss (except in instances of gross misconduct) triggers 18 months of COBRA coverage for you and your dependents. However, your spouse and dependent children are entitled to 36 months of continued coverage under certain circumstances:
Additionally, your dependent child is eligible for 36 months of continued coverage under COBRA when he or she loses dependent-child status on your health insurance plan. Read Health insurance options after loss of "dependent" status.
- You become eligible for Medicare.
- You get divorced or legally separated.
- You die.
Your former employer can cancel your COBRA coverage if it drops group health insurance coverage completely or goes out of business. When an employer goes out of business or drops its employee health insurance altogether, the group that formed the basis for its group health insurance plan disbands. When this happens you are no longer eligible to receive COBRA.
If you move outside your COBRA health plan's coverage area, you effectively "lose" your COBRA benefits. Let's say you lose your job in California and decide to seek new employment in Boston. You can still enroll in COBRA, but it's not going to do you any good unless you intend to fly to California every time you need medical treatment or a prescription. Most health insurance plans insist that you use their local provider networks. Your employer is not required to offer you a plan in your new area.
You must pay 100 percent of your health insurance premiums under COBRA, plus up to a 2 percent administrative fee. Cost is a major factor to consider when buying COBRA coverage. By law, you have to pay 100 percent of the plan's premiums, plus up to a 2 percent administrative fee. According to Families USA, the national average cost of employer-provided family coverage under COBRA, plus the 2 percent administrative fee, is $7,194 per year, or about $600 per month. That's a lot of money for someone trying to support a family on the national average monthly unemployment benefit of $939 per month.
COBRA can be used to protect your health insurance rights under the federal HIPAA law. If you plan to skip COBRA — because it's expensive or you're hoping to find another job that offers group health insurance — think again. Consider what could happen if your job search drags on longer than you expect, you're diagnosed with a chronic or serious illness, or, if you're a woman wanting to start a family, you become pregnant. If you create a gap in your coverage of more than 63 days, you'll lose your health insurance rights under the federal HIPAA law.
HIPAA (the Health Insurance Portability and Accountability Act) guarantees that people who have continuous health coverage — without a gap of more than 63 days — can't be denied health insurance even if they have a pre-existing condition, such as diabetes. So if you forgo COBRA and wind up with a three-month gap in your coverage, you would lose your HIPAA protection when you later decide to buy insurance. This could lead to serious financial consequences. Read The HIPAA law: Your rights to health insurance portability.
If you're eligible for Social Security disability benefits, you may receive 29 months of COBRA coverage. If you are determined to be disabled by the United States Social Security Administration (SSA), you may be entitled to up to 29 months of COBRA if:
- You have experienced an 18-month qualifying event for COBRA (voluntary or involuntary job loss).
- SSA has determined you were disabled either before the COBRA event or within the first 60 days of COBRA continuation coverage.
- Your health plan administrator has a copy of your SSA disability determination within 60 days after the determination is issued and before the end of the initial 18 months of COBRA.
Many states have adopted their own "mini-COBRA" laws that grant broader rights in determining COBRA eligibility. Even if you work at a small company that is exempt from federal law, you might not be completely out of luck when it comes to COBRA. Many states have their own "mini-COBRA" laws that give workers at firms with between two and 19 employees the right to purchase COBRA. Read State-specific laws for COBRA.
Under COBRA, you have the same health insurance rights during "open enrollment" as your former employer's active employees. If your former employer offers an open enrollment period to active employees and you're on COBRA, you (and your COBRA-enrolled spouse and dependent children) also have the right to switch health insurance plans at that time. You may also add new dependents if your employer offers this option to active employees. Newborns, however, can be added at any time during the year as long as they are added within 30 days of birth. See How to choose a health plan during open enrollment.
Because COBRA is a federal law, the United States Department of Labor has jurisdiction over COBRA grievances. If you have questions about COBRA or self-insured employer plans, which are both governed by the U.S. Department of Labor, contact your regional or district office of the Pension and Welfare Benefits Administration of the U.S. Department of Labor.
Even if you enroll in COBRA on the last day that you are eligible, your coverage is retroactive to the date you lost your employer-sponsored health plan. COBRA beneficiaries have 60 days to decide whether they want COBRA coverage. If you enroll in COBRA before the 60 days are up, your coverage is then retroactive, providing you pay the retroactive premiums. This means that you can initially put off your decision about COBRA, but if you experience health problems that generate medical bills in excess of COBRA premiums within the time limit, you can retroactively — and legally — elect COBRA to cover those bills.