When a person is gainfully employed with a company that offers group health insurance, they are covered in case they need medical attention. But should the employer run into trouble financially and announce layoffs, the employee is left in a lurch without health coverage for an indefinite period of time. That’s where COBRA extended health coverage comes into play.
What is COBRA Extended Health Coverage?
COBRA is short for Consolidated Omnibus Budget Reconciliation Act, passed by Congress in 1986. While its title sounds irrelevant to the health care industry, a section of the Act lays out health benefit provisions that call for a continuation of group health coverage should the employee lose his or her job.
Who is Eligible for COBRA?
People who have voluntarily or involuntarily separated from their employer or those who have had their hours reduced may be eligible for COBRA. Also, the person must have been covered under the employer's health plan, and the health plan must be in effect for current employees.
Who Benefits from COBRA?
In terms of who benefits the most from COBRA, one must consider that electing COBRA extended health coverage is significantly (some say prohibitively) expensive. It would make more sense for a single individual in good health to opt for cheaper short-term health insurance or even a more comprehensive individual health plan.
However, a family of four with multiple ongoing medical needs may want to elect COBRA extended health coverage since medical expenses would quickly outpace the cost of COBRA if the family was otherwise uninsured.
How Does COBRA Extended Health Coverage Work?
Participants separated from their employer are provided with the COBRA election notice in person or by mail. If by mail, the employer must send the COBRA election notice no later than 14 days after the plan administrator receives word that a layoff has occurred.
After receiving the COBRA election notice, the former employee has 60 days to decide whether to elect COBRA extended health coverage. If the person elects COBRA, he or she has 45 days to pay the first COBRA payment.
How Long Does COBRA Last?
In ordinary circumstances, COBRA extends health coverage for 18 months. However, if the person is qualified as disabled, COBRA can extend health coverage for an additional 11 months, totaling 29 months of health coverage.
Furthermore, according to the IRS, the American Recovery and Reinvestment Act of 2009 allows for an employer-provided 65 percent subsidy for qualified laid-off workers to continue COBRA for up to nine months.
How to File for COBRA Extended Health Coverage
Information on how to file for COBRA extended health coverage is provided in the health plan’s rules and by the former employer in the employee’s separation paperwork. By law, these rules must clearly explain how to file for COBRA benefits and procedures for processing claims. The employer’s plan administrator is the point of contact for any questions or concerns regarding COBRA extended health coverage.
COBRA extended health coverage is best for large families with recurring healthcare costs. While it may prove unnecessarily expensive to single individuals in good health, COBRA remains an option to bridge the healthcare coverage gap between jobs.
See related article, How to Purchase Individual Health Insurance.
Daniel Gansle - Daniel J. Gansle is the author of 2012: Day of Reckoning, graduate of Anthropological Studies and expert in ancient Mayan culture.
