The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, is a law passed by the U. S. Congress and signed by President Reagan that mandates an insurance program giving some employees the ability to continue health insurance coverage after leaving their employment.
This is a federal act which requires each group health plan to temporarily allow employees and certain dependents to continue the group coverage that had been provided by their employer for a stated period of time following a qualifying event that causes the loss of group health coverage. This coverage, however, is only available in specific instances.
Qualifying events listed in the statute are loss of benefits coverage due to:
- reduced work hours
- death or divorce of a covered employee
- termination of employment
- a dependent child reaching the age at which he or she is no longer covered
- covered employee's becoming entitled to Medicare
COBRA also allows for longer periods of extended coverage in some cases, such as disability or divorce, than others, such as termination of employment or a reduction in hours.
Unlike other federal statutes such as the Family and Medical Leave Act (FMLA) which require the employer to pay for the cost of providing continuation coverage, COBRA instead allows employees and their dependents to continue coverage at their own expense by paying the full cost of the premium that the employer previously paid, plus up to a 2% administrative charge (150% for the disability extension). Employees and dependents lose coverage if they fail to make timely payments of these premiums.
Employers are required to inform employees and dependents upon loss of coverage, in writing, by at least fifteen days before the coverage ceases.
Participation in COBRA is voluntary and requires payment by the former employee in order to receive continued health plan benefits. With a lost of employment or family member serious consideration should be made as to weather continuing coverage is feasible or necessary.
COBRA contains provisions giving certain former employees, retirees, spouses and dependent children the right to temporary continuation of health coverage at group rates.. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer formerly paid a part of the premium. Despite the fact that COBRA is generally less expensive than individual health coverage the cost to a retired or unemployed person or a spouse and dependant children can still be expensive.
There are however times when one should seriously evaluate the need for continuing health care coverage such as:
- If you or your dependants have had recent health problems, are undergoing treatment or may require surgery. Some policies do not cover pre existing conditions.
- If you or your dependants have had ongoing or chronic health problems.
- If you or your dependants are taking expensive medications.
- If you or your dependants have been declined for private insurance recently.
- If you or your dependants have a history of medical problems.
- If you have had an accident within the 60 day window of enrollment.
If you or your spouse are pregnant or planning to get that way. - If you got a job and your new employer does not offer a health plan.
- If you have had comprehensive benefits and don't mind paying more for them.
- If you want continual, guaranteed coverage despite a higher cost.
Additional information can be obtained from the Centers for Medicare and Medicaid
http://www.cms.hhs.gov/COBRAContinuationofCov/
or the Department of Labor site
http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.html
