When individuals leave an employer, one of the biggest decisions they may need to make is what to do about continued health insurance. For those who will lose their coverage due to a job loss – or even a reduction in hours – COBRA is available to extend the individual’s employer sponsored health insurance benefits, at least temporarily.

Many people have heard of COBRA, yet few are familiar with exactly what this coverage is and how it works. It is important, however, to have a good understanding of the benefits and the costs that are associated with this type of plan. This information could have an impact on whether or not it is the best alternative.

The term COBRA actually stands for the Consolidated Omnibus Budget Reconciliation Act of 1985. Through this Act, most employers that provide group medical insurance benefits to their employees are required extend (temporarily) these benefits to employees who have been terminated, laid off, or had other similar “qualified” changes in their employment status. All employers that offer COBRA are required to notify their employees that this option is available to them.

Who Must Offer COBRA?

Nearly all group health insurance plans that are maintained by employers will be subject to the provisions of the COBRA law. This includes employers that are in the private sector, as well as both state and local government employers.

Typically, companies that employ a minimum of 20 employees for at least 50 percent of business days in the prior year will be required to offer COBRA coverage to those who are no longer eligible to participate in their employer-sponsored health plan.

In determining the number of employees that a company employs, all part-time employees will be counted as a fraction of a full-time employee. Therefore, a firm that only employs a few full-time workers, but a large number of part-timers, may still need to comply with the COBRA requirements.

The few exceptions to offering COBRA include:

The Group Health Plan of the Federal Government. Although these health insurance plans are not subject to the provisions of COBRA, they are required to offer their employees continued health insurance coverage through the Federal Employees Health Benefits Act of 1988.

Small Employer Health Plans. Certain small businesses are also not subject to COBRA. These include companies that employ less than 20 employees during the previous calendar year.

Some Church Health Insurance Plans. Certain church related health insurance plans are also not required to follow COBRA’s provisions.

How COBRA Works

For those who opt for COBRA coverage, they will essentially have the same health insurance benefits that they possessed with their employer-sponsored plan. The same medical conditions can be expected to be covered in the same way. COBRA benefits begin on the same day that the employee’s original employer sponsored coverage would have ended.

This coverage can last up to a maximum of 18 months, however, in certain circumstances such as a disability, the coverage length may be extended for up to 29 months. Otherwise, COBRA benefits will end either when the covered individual stops paying their premiums or when they obtain new health insurance coverage via an employer or a stand-alone health insurance policy.

Certain qualified individuals such as spouses and dependents are also eligible for COBRA in many cases. For example, those dependents who receive their health insurance coverage via an employee’s plan could lose their benefits due to the employee’s death, a divorce or separation from the employee, or through other specific qualifying events. Should this happen, the spouse and / or dependents may continue their health insurance coverage through COBRA for up to 36 months.

How Much Does COBRA Cost?

For those who are covered under group health insurance plans, it is likely that the premium is split in some way between the employer and the employee. This creates a nice cost savings for the covered employee.

However, when an employee is no longer eligible to participate in the employer plan, 100 percent of the premium will become the responsibility of that individual. The ultimate cost largely depends on the benefits offered. Depending on the benefits offered, this can be quite costly. In addition, there is oftentimes a lapse between the date of the former employee’s decision to elect COBRA and their final day of employment. This will result in the individual having to pay retroactive premiums for COBRA that will go towards covering that period of time.

Should the employee decide to continue coverage through COBRA, they will not only be required to pay the entire premium cost, they may also need to pay an additional fee of 2 percent in order to cover the administrative costs of extending the coverage.

The actual cost of COBRA coverage will vary a great deal. This is due to the many variations in each employer’s health plan cost. It is required, however, that the premium for each participant may not exceed a total 102 percent of the standard cost of participating in the employer plan.

In this case, it is important to compare the required premium for a COBRA plan that is offered with other stand-alone individual or family health insurance policies. Oftentimes, the cost of this type of coverage may be well below that of the COBRA premium – and the stand-alone plans may even have a longer benefit duration as well. This is especially important if the new coverage will be for a more permanent period versus being simply a temporary insurance plan for someone who is between jobs.

COBRA Alternatives

Due to the potentially high cost of continued coverage through COBRA, there are alternatives that could allow an individual, as well as their dependents, to obtain good quality health insurance benefits at a reduced cost.

It helps to do a side-by-side comparison of the benefits that would be included in the COBRA plan and the coverage that would be offered in a new policy. In addition, by obtaining a stand-alone plan, it is also possible to include additional benefits that may be needed, or to subtract coverage that may not be necessary for the policyholders’ current situation. An insurance professional who is experienced in offering health coverage can help in making this determination.

You can find quotes for Georgia insurance for unemployed, Oklahoma insurance for unemployed on the author\’s website.
The author Alston J. Balkcom is a Connecticut insurance broker.

You can find quotes for Kansas insurance http://cheaper-insurance-online.com/cobra-insurance/Kansas-cobra-health-insurance-ks.htm or COBRA insurance in Florida http://cheaper-insurance-online.com/cobra-insurance/Florida-cobra-health-insurance-fl.htm on the author Alston J. Balkcom\’s website.

Author Bio: You can find quotes for Georgia insurance for unemployed, Oklahoma insurance for unemployed on the author\’s website.
The author Alston J. Balkcom is a Connecticut insurance broker.

Category: Finances
Keywords: cobra insurance, health insurance, medical insurance, insurance, finance