Understanding Cobra Insurance : Eligibility, Coverage, and Cost

1. Introduction

   Americans across the USA seek health insurance alternatives regardless of their employment status. The problem for U.S. citizens becomes more prominent when they become unemployed due to unfortunate events. In the recent past, the right of all American workers to access the employer’s health coverage while not working for the employer has been solidified with an act called COBRA. Irrespective of your present status as an employee of a particular company, you will have coverage according to your healthcare needs.

   The Consolidated Omnibus Budget Reconciliation Act, known by its abbreviated form COBRA is one type of health insurance program through which a policyholder will continue to earn the benefits of the health insurance coverage well after losing the job or in case of a reduced amount of working hours. Your health insurance benefits will remain intact whether you have quit the job voluntarily or involuntarily. Even an employee will keep receiving these health insurance benefits if the working hours change. As an American citizen, you can thank President Ronald Regan (1985) for passing this act as this act enables you to pay for yourself even after losing a job.

   So, you might have many questions regarding COBRA insurance and how everything works. This article will discuss everything you need to know about COBRA insurance.

2. What is COBRA Insurance?

   The U.S. The National Congress passed the act back in 1985 to save the rights of employees who lost their jobs for some reason. Once you lose the job, you will start getting COBRA benefits. This health insurance coverage is often referred to as ‘Gap Coverage’ as it secures an employee’s right to get health insurance between jobs.

   COBRA continuation coverage allows workers who have separated from their job to continue their employer-sponsored health insurance for up to 18 or 36 months, depending on the reason for the separation.^[1]

   Employees can continue to pay the premiums instead of their previous employer as they no longer qualify for the benefits under company policy. In return, the employee will keep receiving group health insurance coverage per federal law. The act came into effect in 1986, and since then, it has helped thousands of employees across the USA. One thing you should know is that only some, both employers and employees, qualify to get the benefits of COBRA.

3. Who is Eligible for COBRA Insurance?

   As the law states, most employers are bound to offer their employees continued health coverage. The beneficiaries who will receive health coverage even after getting fired or a change in work schedule are known as ‘qualified beneficiaries.’ Not only the employees, their spouses, ex-spouses, and even the children are eligible to receive the benefits through COBRA. Group health plans under COBRA are for government and private sector employees. At present, while taking the job, most U.S. citizens, whether the employer offers COBRA benefits or not.

   Qualifying criteria are different for every employee. An employee who meets these eligibility criteria can only receive COBRA coverage. But that’s not it; you must also come under specific qualifying events as an employee. Employers holding at least 20 full-time employees or equivalent can get COBRA coverage. This equivalent full-time employee is calculated by adding up the working hours of all part-time employees. Only the Federal employees don’t get the benefits of COBRA, but a similar law protects their rights. Now let’s look at what an employee needs to have to get COBRA benefits.

   • The employee must have a group health insurance plan on or before the day of the qualifying event.
   • In a calendar year, the group insurance plan must remain active for at least 50% of business days.
   • The departing employee will only get the benefit if the existing employees keep being part of the same plan.

   Now let’s look at the qualifying events which ultimately determine whether the employee or the list of beneficiaries will get the health insurance benefits.

   For Employees

   • In case an employee loses the job or quits the job.
   • Decreasing employment hours.

   For Spouses

   As we have previously mentioned, not only the employees and their spouses can also avail the benefits of COBRA under the following circumstances.

   • If the spouse is divorced or legally separated from the employee.
   • The spouse becomes a widow after the death of the employee.
   • The employee is eligible to get Medicare.
   • Lastly, a child dependent on the employee will also receive COBRA benefits.

4. What Does COBRA Insurance Cover?

   As mentioned in the Federal law by the U.S. Department of Labour, you will keep receiving the same benefits you previously received from your past employer. The entire health insurance plan will remain the same if you choose COBRA insurance. You and the beneficiaries mentioned in your insurance plan will receive in-office physician care, inpatient and outpatient hospital care, and prescribed drugs by the medical physician. The cost of your vision and dental treatment will also be covered by COBRA insurance.

5. How to Enrol in COBRA Insurance

   If you are eligible for COBRA insurance and utterly sure of availing of the insurance benefits, you should enroll without wasting any further time. As per the U.S. Department of Labour, you need to notify the insurance company about the status of your qualifying event. You must work with your employer to contact the best insurance company. Once you inform the insurance company about your situation of qualifying event, the insurance company will send you the COBRA election notice within 14 days. In that notice, you will find all the information regarding the health insurance benefits that you will receive in the upcoming years. You will also know about the premium cost through this notification.

   After receiving the notice, you will have 60 days to return the election notice to the insurance company. When you return these documents, your COBRA insurance will automatically begin. There is no need to pay the first premium notice, and after 45 days, you will start getting COBRA coverage.

6. How Much Does COBRA Insurance Cost?

   When you hear the term’ Group Rate’, the insurance is available at a discounted rate. When you are an active company employee, the employer usually pays a significant amount of the insurance premium (almost 80% of the total premium cost). As an employee, you need to pay the rest. When your employment status changes, you need to pay the entire amount, which may seem like a burden to you.

   Employers can charge up to 102% of the premium for COBRA coverage, making it unaffordable for many workers. Because cost is a significant factor, there could be little or no increase in range if there is no reduction in cost (or healthcare cost inflation). According to one survey, in 1994, average COBRA costs were $5,301 per COBRA-covered worker, compared with $3,420 for active employees. Any expansion of COBRA would likely increase employer costs for health insurance.^[2]

   So, overall, in the COBRA continued plan after the change in your employment status, the premium cost remains the same, but you have to pay the entire premium amount by yourself. You may even get qualified for subsidiaries. You can become fully aware of the premium amount from the human resource department of your previous office.

7. Alternatives to COBRA Insurance

   If in any unfortunate turn of events, you lose your employer-sponsored health insurance, then you can avail the benefits of COBRA. But in case you don’t want to get into the completed process of an insurance claim, there are some other options that you can explore.

   You become eligible for a particular enrolment period when you lose health insurance coverage after quitting your company. You can avail of this benefit from the health insurance marketplace. Even if you are out of the open enrollment period, then you can also apply for insurance in the open enrollment period. In the particular enrollment period, you will keep receiving the benefits of your old company-offered insurance, and after 60 days, you can enroll for the new health plan. Depending on your financial condition, you can choose a marketplace plan comparatively cheaper than COBRA life insurance.

   While searching for a pocket-friendly marketplace plan, you will come to know whether any of your family members qualify for Medicaid services or CHIP (especially for children who are dependent on you).

   Medicaid expansion can improve access to care, self-reported health, and survival, but some contend that the program is substantially inferior to private insurance.^[3]

8. Conclusion

   Now that you know all the benefits of COBRA insurance there, we hope you feel less worried about the security of your health. If you plan to do something new in your professional life or get fired from your company for some unfortunate reason, you can enrol for COBRA. As we have already mentioned, after enrolment, you will start receiving the same health insurance benefits your previous employer offered. The only difference is that you must pay the premium instead of your employer. If you are eligible for COBRA insurance, enrol as soon as possible with all the required documents to keep receiving healthcare coverage. If you are looking for other alternatives, then there are tons of different options available that you can get from the insurance marketplace.

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