COBRA Health Benefits: What You Need to Know

It can happen in a blink of an eye. A job you thought was rock solid is gone. Either the employer is downsizing or going out of business. Being newly unemployed, not only do you no longer have an income coming in the door, but you also no longer have company-paid health benefits for you and your family.

COBRA Health Benefits may be able to help. COBRA stands for Consolidated Omnibus Budget Reconciliation Act. This legislation was originally passed by Congress in 1986 and has been updated in 2009 as part of the stimulus bill.

COBRA requires employers with more than 20 full- and part-time employees to continue health care coverage for former employees who are now unemployed in certain circumstances for certain lengths of time. COBRA health benefits are meant to bridge the gap until an unemployed worker finds a new job with a new group health benefits package. COBRA can provide temporary relief for employees, especially in today's rough job market.

Am I eligible for COBRA Health Benefits?

You are generally eligible for COBRA Health Benefits if you were the employee of a company with 20 or more full- and part-time workers prior to your termination, whether voluntary or involuntary. In some cases, you are also eligible if you were an independent contractor, agent or director of the company if you had been participating in the group health plan. Your family members may also be eligible for COBRA Health Benefits upon your death while participating in the company's group health plan or if you and your spouse divorce.

How do COBRA Health Benefits work?

Once one of the events above occur, the plan administrator is notified either by the company (in the case of termination or death) or by the employee's family (in the case of divorce) and a COBRA Health Benefits application is sent out within 14 days. The unemployed individual or his or her family has 60 days to decide whether to continue health coverage under COBRA and then must pay the first COBRA premium within 45 days after sending the application.

Once COBRA Health Benefits are in place, you will file claims in the same manner as when you were working, either through the employer representative or directly with the insurer. The amount of coverage remains the same as if you were still employed by the company. If changes are made in the plan that affect all covered employees, that change will also affect your coverage. If the employer stops offering health care benefits altogether, your COBRA benefits will likely cease as well.

How long can I get COBRA Health Benefits?

The standard period of coverage under COBRA Health Benefits is 18 months but that can be extended under certain circumstances such as disability. A company can choose to offer health benefits to former employees and their families for longer periods of time than COBRA dictates if they wish. If a company offers that former employees can choose to convert their group health plan coverage into an individual plan, it must also offer that to former employees when their COBRA Health Benefits run out.

How much do I have to pay for COBRA Health Benefits?

COBRA Health Benefits require that the former employees or family pays the entire health care premium, including any portion that the employer paid on behalf of the employee in the past. The plan can also charge an additional 2% for administration costs. Companies can choose to continue to pay for a portion of the health benefit premiums. If an extension of COBRA Health Benefits is granted due to disability, the premium could increase up to 150% of the actual premium.

Paying the full group health premium is likely to be higher than what you were paying when you were employed but in most cases it is less than what you would pay for an individual policy.

The stimulus bill provides additional relief for COBRA applicants. If you lost your job involuntarily between September 1, 2008 and December 31, 2009, you may be eligible to pay only 35% of the COBRA Health Benefits premium otherwise applicable for up to 9 months. You may also be eligible to enroll in the plan if you had previously declined or ended benefits with the reduced premium.

COBRA Health Benefits can assist unemployed workers to maintain their current standard of living while they transition into a new job. If you have further questions about how the plan will work for you, call your plan representative.