COBRA -- Critical Information

About Your Health Insurance

What happens to your health insurance if you get laid off or fired from your job? How will you pay your medical bills?

The answer is COBRA, also known as The Consolidated Omnibus Budget Reconciliation Act of 1985.  COBRA is a federal law that ensures the continuance of your health insurance coverage for up to 18 months after the date of your employment termination. Most companies that offer group health insurance are subject to COBRA, and certain situations can extend this coverage period up to 36 months.

Who Benefits from COBRA?

COBRA insurance protects those who have lost their jobs against losing their health insurance benefits too. COBRA is a temporary measure designed to help individuals through this difficult time. Not every terminated employee qualifies for COBRA insurance, but all employers know whether these rules apply to their company and their employees. Employers are required by law to notify eligible former employees of their option to purchase health insurance through COBRA. Employers must also specify the cost for this coverage. Those receiving this notification have up to 60 days to accept COBRA coverage.

COBRA kicks in when an eligible employee is terminated, laid off, or experiences some other type of change in his or her employment status (such as reduced hours, or divorce from or death of the eligible employee). COBRA continues according to the schedule above, or until the terminated employee is covered by an individual health insurance plan or another group health insurance plan.

Who Pays For The Insurance?

The law enables you to buy health insurance for yourself (and your family if you had family coverage while employed) at the group rate, even though you are technically no longer part of the group. The price of coverage is high, and the former employee is responsible for paying 100% of the cost each month, plus a 2% surcharge.

Because COBRA extends a terminated employee's existing health insurance for a period of 18 months, those who participate in COBRA need not worry about any changes in their benefits. Coverage itself does not change; only the person responsible for paying the monthly premium. All family members who were covered prior to termination remain covered during the course of COBRA as well. In fact, the only way coverage can change is if the employer changes the health insurance plan offered to its current employees.

COBRA Is Only Temporary

The important thing to keep in mind about COBRA is that it is intended to be used as a temporary measure. It guarantees you won't be without health insurance for 18 months. Once that period expires, you will find yourself without health insurance if you have not secured it otherwise, either from a new employer or by obtaining an individual health insurance plan.

It is in your best interest to find new health insurance as soon as possible, because life is unpredictable. You never want to find yourself in a situation where you detect for the first time a serious medical condition (such as cancer) while covered under COBRA. Such a situation could cause you to become uninsurable when your COBRA coverage expires, because you've now developed a "pre-existing condition."