COVID-19 has disrupted the working lives of millions. Temporary furloughs from work have turned into permanent layoffs for many people. It means more than just the loss of a paycheck. Folks rely on the health coverage they receive from their employers. The group health plans prevent personal budgets from being wrecked by medical expenses.
Now, there is a chance that there will be no protection from sizable hospital bills. Fortunately, because many have health insurance through their employers, they are eligible for COBRA coverage. It is crucial for anyone who has lost a job to understand COBRA and its benefits and costs.
What is COBRA Health Care?
It is the acronym for Consolidated Omnibus Budget Reconciliation Act. The law permits an individual who has lost a job to continue receiving the coverage of their former employer’s health insurance plan. A person qualifies for COBRA if:
- He or she was covered by an employer’s group health plan
- That same individual was fired, laid off, voluntarily terminated employment, retired, or working hours were reduced so that the employer was no longer required to provide group health insurance.
COBRA does not just cover the individual. Dependents are also covered under COBRA. A dependent’s qualification for COBRA is determined by the following:
- The individual is a dependent of a former employee who qualified for COBRA.
- The individual is a spouse who divorces or has filed for a legal separation from someone who qualified for COBRA.
- The individual is the spouse of an employee who qualified for COBRA and died.
COBRA Health Care Deadlines and Length of Coverage
Various time frames govern COBRA. The former employer must provide information about COBRA rights within 14 days of the termination (a qualifying event). The former employee is allowed no more than 60 days after receiving information to decide whether to continue health coverage under COBRA. Should an individual elect to have COBRA coverage, the day that the existing group health coverage expires is when the COBRA coverage begins and the duration of coverage depends on the qualifying event. Ordinarily, that is the employee’s termination of employment or is a reduction in the employee’s work hours (the employee must be terminated for reasons that do not include misconduct). The coverage will last for 18 months.
There can be extensions if there is a second qualifying event or if a qualified beneficiary becomes disabled. Other conditions can affect the duration of coverage, such as the death of the covered employee or that person qualifying for Medicare, but the maximum coverage period for COBRA, including coverage for dependents, is 36 months. Failure to pay premiums on a timely basis is a justification for terminating COBRA coverage.
The Benefits of COBRA Health Coverage
The obvious benefit is being able to continue insurance protection under the former employer’s group health plan. That continued coverage means that the provider networks under the group health plan are still available to the former employee. That is extremely important when it comes to health benefits.
It is already established that the former employee’s doctor is part of the provider network and this allows the former employee to take advantage of any provider network discounts. It is possible to get an individual health insurance policy from the insurance market, but the physician might not be part of the policy’s network. It can mean that the former employee has to assume additional costs, or not get financial help for an existing medical condition.
Familiarity with the former employer’s group health plan is advantageous. A person with COBRA coverage knows what to expect when it comes to copayments and deductibles. What is not covered is also familiar to the COBRA recipient.
Taking COBRA coverage will remove a lot of anxiety about health insurance. There is no need to go looking for another policy because the old policy is still in force for a set period. However, there is a drawback to COBRA you need to know. This form of health insurance does not come cheap.
Anticipate a Higher Health Care Premium
It would help if you braced yourself for a substantially more expensive premium than what you are used to paying. The reason is that you assume the entire cost of the premium, something you probably did not know much about before.
Employers will ordinarily pay the larger share of the group health premiums. Individual employees pay a portion, but this share is substantially smaller. COBRA requires you not only to pay the full premium but also pay an administrative fee of at least 2%; you are paying 102% of the medical premium.
What does that mean? Let us take an example. Suppose you are paying $50 a month for single coverage (you will pay a lot more for family or dependent coverage). Your employer has agreed to pay 70% of the premium, and you must pay 30% of the amount. The new insurance premium’s base is approximately $166; add the administrative costs, and you will now be paying a premium of $170 a month! That can take a sizable chunk out of your unemployment compensation check and any severance you might be receiving from your former employer.
There is also a time limit. COBRA recipients must always remember that there is going to come a day when this type of health insurance will no longer be available. New insurance must be found sooner or later.
We Can Help You
We have considerable experience in assisting people with health insurance. We understand what the options are and can discuss the possibilities with you at your convenience.
We can discuss the alternatives and suggest how to deal with the cost of health insurance. We are willing to help you find an acceptable health insurance policy, but if we believe that you are better off with COBRA coverage, we will tell you that. What best meets your needs is our primary concern.