Understanding How COBRA Health Insurance Operates
COBRA health insurance coverage allows employees to remain on their employer’s health insurance plan after leaving employment.
Under COBRA (Consolidated Omnibus Budget Reconciliation Act) continuation of health coverage begins from the day a covered employee’s health insurance ends and can last from 18, 29, or 36 months. We shall discuss these time frames further below.
Qualifying for COBRA Health Insurance
If you are considering COBRA health insurance, be sure to check the qualification requirements
Employees are eligible for COBRA health insurance in the following cases:
- Involuntary or voluntary job loss provided termination was not due to “gross misconduct.”
- Reduced working hours. Often, such a scenario triggers the loss of employer health insurance coverage.
Qualifying employees can only receive COBRA health insurance after specific qualifying events, as we shall see below.
Employers who have more than twenty full-time-equivalent employees are obligated to provide COBRA coverage.
COBRA health insurance applies to plans that private-sector employers offer and those that many state and local governments sponsor.
Federal employees receive health insurance coverage that is similar to COBRA. Local health insurance laws in many US states are comparable to COBRA.
These laws are often known as mini-COBRA schemes and usually apply to employers who have less than 20 employees.
COBRA health insurance eligible employees must register in a company-funded team health insurance plan before the qualifying situation occurs. The insurance plan must be effective on up to 50% of the employer’s usual business days in the preceding calendar year.
The employer must continue offering its current workers a health insurance plan if the departing employee is to be eligible for COBRA health insurance coverage.
What happens if the employer is either ceasing operations or no longer offers health insurance to the current employees? In this case, the departing employee will not qualify for COBRA health insurance.
Time Frame for Covered Employees
If you are considering COBRA health insurance, be aware of the time frame you will be covered
Employees qualify for eighteen months of continued COBRA coverage if:
The qualifying situation is a result of the termination of employment or reduction of working hours. Termination, in this case, can be involuntary, voluntary, or due to retirement.
Employees who become disabled within the first sixty days of receiving COBRA health insurance qualify for 11 more months of coverage, which is equivalent to twenty-nine months of coverage in total.
What should an employee do to acquire this extension? They must alert the insurance administrator of their disability within sixty days of occurrence, and before the expiry of the eighteen months.
Time Frame for Other Eligible Beneficiaries
Time frames also apply for qualified beneficiaries, especially dependents like children and spouses.
Other qualified beneficiaries can be allowed up to thirty-six months of insurance coverage in case a second qualifying event occurs within the first eighteen months of coverage.
The second qualifying situation cannot result from a reduction of working hours or termination of employment. Instead, it should be as a result of legal separation or divorce between the employee and the spouse or the death of the covered employee.
The loss of a beneficiary child or the covered employee eligible for Medicare can also trigger the second qualifying event.
If a disabled beneficiary is receiving COBRA health insurance for any of the above reasons, the maximum coverage period remains 36 months.
Premature Cancellation
You can cancel a participant’s COBRA health insurance coverage before the time frame set by law if:
- You have canceled all your group health plans.
- The participant has coverage in a different plan.
- The participant does not pay premiums on time. Each participant should receive a thirty-day grace period to submit late payments.
- The participant became eligible for Medicare after choosing cobra health insurance.
- The US social security administration does not consider the participant disabled.
Remember that some American states have mini COBRA laws that address the coverage time frame. Some States in America observe the federal guidelines while others have coverage durations that differ from federal law.
Take Away
Consolidated Omnibus Budget Reconciliation Act (COBRA) is a convenient choice for maintaining health insurance if you lose your employer-funded health benefits.
While it is often the best option, the cost can be high, and the plan is not always ideal for a family or individual’s needs.
