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What Is Cobra Health Insurance? How Does It Work?

We are going through some interesting times. The coronavirus has effectively placed the United States economy in a lockdown with workers sent home to avoid infection. It is hard to say when things are going to get back to normal, although President Trump is pushing for business to get back on track by Easter. We do not know at this moment what the coming weeks are going to hold.

Many employees are getting a little bit anxious and are worried that a temporary leave is going to turn into a permanent layoff. It is disturbing because many are afraid they’re going to lose their employer-sponsored health insurance. Fortunately, most employees are in less danger of losing employer-sponsored health insurance than they imagine. The Consolidation Omnibus Budget Reconciliation Act, commonly known as COBRA, is there to protect them.

What is COBRA?

COBRA permits a person who has lost his or her job, either voluntarily or involuntarily, to continue coverage under the employer-sponsored health insurance that a person had. It is an intentional safety net for families and allows health coverage for a set period.

An individual is given the option to continue coverage for no less than 18 months after he or she has lost employment, or the employer drastically cut hours that made that employee not eligible for the health plan. Private sector companies with 20 or more employees and state and local government workers are covered by COBRA. Some states have their own mini version that will apply to employers that have less than 20 employees.

The Time Regulations Under COBRA

There are specific deadlines that both the employer and the employee must meet under COBRA. The employer has 30 days to notify the health insurance plan that a job termination has occurred. The former employee must then notify the plan within 60 days if he or she wishes to continue the health insurance under COBRA guidelines. There are circumstances where the coverage can extend beyond 18 months to a total of 36 months.

Dependent coverage does not always end after 18 months. Continued coverage is permissible up to 36 months under specified conditions. A dependent child is eligible for 36 months of continued coverage under COBRA when that person no longer has dependent child status on the health insurance plan.

The Cost

Employers will send COBRA information to the former employee, ordinarily by registered mail. When a person gets that letter, he or she quickly realizes just how much the employer contributed to the premium for the health care coverage.

COBRA is not cheap. The old employee must assume the total cost of the premium and that includes employee and employer contributions. The cost can be several hundred dollars more per month than what the person used to pay. The plan has the right to add administration costs to the bill. This is ordinarily 2%, and what it means is that a person electing COBRA pays 102% of the total premium. It can cause anyone to stop a moment and wonder if there are any options. There are alternatives to COBRA.

The Affordable Care Act

The Affordable Care Act (ACA) is a possible source of health insurance besides COBRA. That the open enrollment period for ACA is currently closed is not a problem. Losing a job allows a person to qualify for a special enrollment period. You are thus able to enroll in a Marketplace plan. The special enrollment status can also be used if an individual’s COBRA coverage is about to run out.

The question now is to decide if a Marketplace plan better suits coverage needs than COBRA. Admittedly, COBRA is expensive, but the coverage of the employer-sponsored health plan might be quite generous. There’s also the question of in-network physicians.; a person knows already that his or her physician is part of the employer’s network. A former employee should concentrate on the quality of coverage, understanding that if the policy offers better protection, than it might be the logical choice. It is possible as well that a person can qualify for a subsidy in a marketplace plan, depending on that person’s income.

Short Term Health Insurance

It is also known as gap insurance and short-term health policies will ordinarily provide coverage for six months to a year, depending on the insurer. These plans are relatively inexpensive, but they don’t always offer the extensive coverage of the COBRA policy. However, if a person is healthy and will be employed once again in a few months, a short-term health plan could be ideal.

It Is the Buyer’s Choice

COBRA is there to help a person handle a short-term emergency brought on by the loss of employment. It can be expensive, but the coverage is ordinarily good, and the individual will be working with a physician who has already been approved by the employer network.

Cost is important, but coverage is even more critical. It doesn’t do any good if a person does not have protection for a given medical emergency. COBRA has a set period before it runs out. A former employee can elect to go with the COBRA coverage for a few months and then seek a Marketplace alternative. It is a decision that a person needs to make. We strongly recommend that anyone look at the options carefully before making a choice.

Get Quoted Today

Our licensed agents are ready to help walk you through your options. If we can’t help you find coverage for your unique situation we will be happy to connect you with one of our partners. Contact us today.


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Mike from Columbus, Ohio
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