Understanding COBRA

Congress enacted the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) to give you the option of continuing your health and dental insurance coverage if you lose your job or have another "qualifying event."

Qualifying for COBRA

To get COBRA, a "qualifying event" must occur.

Assuming your employer has 20 or more employees, you can opt to continue your health and dental insurance if you quit your job, are fired (for any reason except gross misconduct), or if your employer reduces the number of hours you work.

You spouse is eligible for COBRA for the same reasons you are and if you divorce, you become eligible for Medicare, or you die.

Your dependent children can qualify for COBRA for the same reasons your spouse can. They will also qualify if they reach a certain age and are no longer deemed dependent children on your current group health plan (loss of dependent child status).

Length of COBRA Coverage

If the "qualifying event" was job loss or a reduction in the number of hours worked, you, your spouse, and your dependents can continue your health and dental insurance for up to 18 months. If another qualifying event occurs during that time, such as a divorce, you have the option of extending your coverage.

If the "qualifying event" was one that is anticipated to last longer than a job loss such as your eligibility for Medicare, a divorce, or your death, your spouse and dependents can enjoy COBRA coverage for up to 36 months.

COBRA Timeline

Your employer will notify your plan administrator that a "qualifying event" has occurred. You will receive a notice that you and your dependents are eligible for continuation coverage. You have 60 days to decide if you want COBRA and you and your dependents can make independent elections. For example, you may elect to continue your health insurance, but your spouse may decline the coverage. Your coverage begins on the date the "qualifying event" occurred assuming you pay the premiums on time. You may be in for sticker shock because you must pay the entire premium, which is likely to be more than the amount that was withheld from your paycheck if your employer contributed to the cost of your insurance.

The Future of COBRA

If you lost your job between September 1, 2008 and December 31, 2009 you may be entitled to reduced premiums thanks to the American Recovery and Reinvestment Act of 2009 (ARRA), which is part of the stimulus package Congress enacted. The act also allows you to elect COBRA coverage if you previously declined it - a provision that was not in the original COBRA legislation.

Beyond COBRA

You are not required to elect COBRA continuation coverage just because it is offered. You may be able to obtain health care coverage for less than what COBRA would cost you. Click here to begin your research. You might also consider going with a health plan that only covers catastrophic illnesses and surgery. If you take prescription medicine Walmart offers $4 prescriptions - see the list here.