What Is COBRA and How Does It Work?
“COBRA” stands for the Consolidated Omnibus Budget Reconciliation Act. The Act is a federal law that’s been in place since 1986. It requires private insurers for employer-sponsored group health plans to keep job-based health coverage in place after qualifying events. These events include being laid off or terminated except for “gross misconduct,” and losing coverage due to a divorce or as a dependent after the death of the primary beneficiary. They also include having your work hours cut.
How Long Can You Stay on COBRA Coverage?
How long you can stay on COBRA depends on the event that made you eligible for coverage. You can stay on COBRA for up to 18 months in most cases, as long as you can pay your premiums. You may be eligible for even more time if a second event occurs in your life. You could qualify for 11 more months if you’re disabled when you become eligible, or if you become disabled within the first 60 days of becoming eligible for COBRA. You may be eligible for up to 36 months if you become eligible for Medicare within 18 months of your event.
Is It Worth Getting COBRA?
Getting or not getting COBRA is up to you. It’s your choice. The pros and cons are spelled out in two U.S. Department of Labor (DOL) publications: Both can help you decide if you should enroll.
Pros and Cons of COBRA
Pros Explained
Your former employee group health plan may have provided you with coverage that you won’t have access to through a private insurer or the Marketplace. Some employer plans include coverages that would otherwise require supplemental health insurance plans. Maternity or childbirth benefits under an employer-sponsored group plan are governed under a different set of laws than Marketplace plans. They often provide better benefits. Choosing to maintain your employee benefits plan through COBRA can allow you to keep access to these coverages. Taking COBRA avoids having to switch plans and contribute out-of-pocket costs all over again after the year has started if you’ve already paid toward your out-of-pocket maximums. This could save you money.
Cons Explained
COBRA will be more costly than what you paid for coverage when you were an employee. Employer-sponsored health insurance is often provided at a portion of the actual cost because the employer pays for part of it. The former employer is not required to keep paying this portion of your premium under COBRA. You may also have to pay a 2% administration fee in some cases. You’ll find yourself without a plan if you don’t find another job or insurance plan by the time your eligibility runs out. You can’t stay on a COBRA plan forever. The normal limit is 18 to 36 months. Not all employer group plans offer COBRA. An employer with fewer than 20 employees may not be required to do so.
How To Sign Up for COBRA
Your employer or health insurance administrator must let you know that you have a right to enroll in COBRA. You then have at least 60 days to decide if you want to sign up. You must tell the plan sponsor if you think you qualify because of divorce, legal separation, or the loss of dependent or child status. You can elect to take COBRA even if the primary employee elects not to do so.
Consider Marketplace Plans
You can enroll in a Marketplace plan instead if you don’t qualify for or choose not to take COBRA coverage. Marketplace, which is short for the Health Insurance Marketplace, was created as an enrollment service for medical insurance by the Affordable Care Act in 2010. You may want to fill out a Marketplace application to see if you qualify for coverage if your employer doesn’t offer it or if you’re between jobs at the moment. You’ll be able to choose from lower monthly premiums or savings on out-of-pocket costs based on your income.
