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Understanding COBRA Health Insurance

COBRA Health Insurance Explained

Understanding COBRA Health Insurance

COBRA insurance can be a tricky topic for many – so sometimes the easiest way to break it down is to think about it in terms of simple questions – what, who, where, why, when, and how. Understanding these basic tenets of COBRA health insurance is the first step to making a wise decision about health insurance after job loss.

It is also the first step in securing your future during an uncertain time by making sure you (and your family) do not experience a lapse in medical care or even go without medical insurance.

What is COBRA Insurance?

Let's start with the basics. First – COBRA insurance is a law, not an insurance policy. The federal government passed the law in 1986 to help people after job loss by ensuring that they wouldn't suddenly be without medical care. The law made it mandatory that these employees have the option to maintain the health plan they had when they were employed for up to 18 months if they met certain requirements and paid the full premium on time monthly. This law, part of the Consolidated Omnibus Budget Reconciliation Act, became known as COBRA insurance.

That means essentially, COBRA is a way to keep your health insurance for you and your family after you lose your job, quit your job, or retire from your job. Since it is an extension of the plan you had while you were working, the plan itself is exactly the same – same doctors, same copays, same deductibles, same prescription costs, everything. The main difference with COBRA insurance is that you 1) must pay the entire premium without any employer help, and 2) it is temporary and only lasts for 18 months in most cases.

Who Can Use COBRA Insurance?

In order to be able to enroll in COBRA and maintain your health insurance plan, the government set out three requirements that you must meet. The first is qualifying plan. Virtually anyone who was employed with a company that had 20 or more employees on the health plan will qualify for this COBRA insurance requirement.

The second, known as qualifying event, refers to how you lost health insurance. You can find information below about events that open up COBRA eligibility. The final requirement is qualifying beneficiary and actually refers to who else can qualify other than the employee. Use the chart below to understand who can use COBRA:

COBRA Qualifying Event COBRA Qualifying Beneficiary Length of COBRA Coverage
Being laid off, quitting, or retiring from a job with a qualifying plan Employee, spouse, and dependent children 18 months
Reduction in hours to no longer be eligible for health insurance Employee, spouse, and dependent children 18 months
Legal separation or divorce Spouse, and dependent children 36 months
Death of covered employee Spouse, and dependent children 36 months
Covered employee becomes eligible for Medicare Spouse, and dependent children 36 months
Loss of dependent status under the law Dependent child 36 months

* This information is a based on the current COBRA insurance laws, however it is best to always consult your health plan administrator to determine the exact length of your COBRA coverage.

Where is COBRA Insurance Available?

COBRA insurance is available in all fifty states in the US through the federal government program. In addition 44 states offer their own mini COBRA or COBRA extension plans that extend COBRA insurance to people who work at companies with between 2-19 employees.

Why Did the Government Creates COBRA Insurance?

The government created COBRA insurance, as part of the Consolidated Omnibus Budget Reconciliation Act in 1986, to protect people from suddenly being without health insurance. They noticed during the down economy that many people who were laid off from their jobs, also found themselves without coverage. This meant that many people didn't get the medical care they needed or acquired huge medical bills. To remedy that situation and give people time to find health insurance or a new job, the government created COBRA insurance.

When Should I Look at Other Insurance Options?

You should always look at other health insurance options when you are considering enrolling in COBRA. The main reason we believe everyone should explore their options is due to the huge savings most people find when they switch to a private plan. In fact while COBRA insurance costs the average family $1000 or more monthly, a similar private plan can cost as little as $400. That's a saving of 60%.

More about COBRA – Federal and state sponsored.

How Do I Sign Up For COBRA Insurance?

Signing up for COBRA health insurance is easy. After you lose your health insurance, your employer has 30 days to provide you with a COBRA insurance election form. You must complete that election form within 60 days of receiving it and pay the premium due. If this is completed on time, you will be signed up for COBRA.

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