Health Insurance: The Basics of COBRA

By Compuquotes Team on May 5th, 2008
Health Insurance

It's important for individuals who have health insurance through their employers to understand their rights under the Consolidated Omnibus Budget Reconciliation Act (COBRA). According to this important piece of legislation, workers who participate in employer sponsored health insurance programs, and their eligible dependents, are guaranteed an opportunity to continue their health insurance coverage following separation for employment under certain circumstances and for a specific period of time.

Before the COBRA legislation was passed, once an individual ceased to be employed his or her access to group health benefits was immediately terminated. Those with pre-existing conditions were often unable to get any type of insurance coverage following such and occurrence. Under COBRA, people may elect, at their own expense, to continue participating in their former employer's group health plans following qualifying events leading to separation from employment. While doing so can be expensive, it can certainly be preferable to dealing with the consequences of becoming uninsured.

If you voluntarily quit your job, you may choose to continue participating in your company's group health insurance plan for up to 18 months following loss of coverage. This is also true if you are terminated from employment, as long as you were not fired for gross misconduct. Employees whose hours are reduced, thus resulting in the loss of eligibility for full-time health insurance benefits, also are able to elect continuation of coverage under COBRA, if desired.

Under some circumstances, COBRA coverage is available for periods of longer than 18 months. For example, individuals who become disabled and are unable to return to work are eligible for COBRA benefits for an additional 11 months, increasing the total time allowed for continued health insurance coverage to 29 months. Additionally, covered dependents of an individual who dies can elect COBRA coverage for up to 36 months, as can dependents who lose access to coverage after a divorce.

It's important to understand that the former employer bears no responsibility for paying for any of the cost of health insurance coverage for those who elect continuation of coverage through COBRA. If you elect COBRA coverage, your former employer will require you to pay the full cost of coverage, and can also charge a small administrative fee to offset the costs of administering the plan.

If you take out COBRA coverage, but do not pay your premiums in a timely manner, your former employer does not have to allow you to continue coverage. Your first premium payment must be made within 45 days of election of coverage, and subsequent payments will be due per the terms of the particular plan. There is a required 30-day grace period for payments, following which coverage can be terminated.

Instead of having no choice but to go without insurance or seek individual coverage immediately upon separation from employment, COBRA allows people to temporarily continue their existing coverage following a loss of eligibility. Even though COBRA coverage can be costly, it can certainly be a better option than facing the potentially disastrous possibility of having a gap in health coverage.

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