COBRA - Health Benefits
What happens to my health insurance?
While dislocated workers may lose health insurance from their former employer, they may have the right to continue health coverage under certain conditions.
Health continuation rules enacted under COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1985) apply to dislocated workers and their families as well as workers who change jobs or workers whose work hours have been reduced, thus causing them to lose eligibility for health insurance. This coverage is temporary, however, and the cost is borne by the employee.
To be eligible for COBRA coverage, you must have been enrolled in your employer's health plan when you worked and the health plan must continue to be in effect for active employees. In addition, you must take steps to enroll for COBRA continuation benefits.
Which employers are required to offer COBRA coverage?
Employers with 20 or more employees are usually required to offer COBRA coverage and to notify their employees of the availability of such coverage. COBRA applies to private-sector employees and to most state and local government workers.
What if the company closed or went bankrupt and there is no health plan?
If there is no longer a health plan, there is no COBRA coverage available. If, however, there is another plan offered by the company, you may be covered under that plan. Union members who are covered by a collective bargaining agreement that provides for a medical plan also may be entitled to continued coverage.
How do I find out about COBRA coverage and how do I elect to take it?
All employers or health plan administrators must provide an initial general notice if you are entitled to COBRA benefits. You probably received the initial notice about COBRA coverage when you were hired.
When you are no longer eligible for health coverage, your employer has to provide you with a specific notice regarding your rights to COBRA continuation benefits. Here is the sequence of events:
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Employers must notify their plan administrators within 30 days after an employee's termination or after a reduction in hours that causes an employee to lose health benefits.
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The plan administrator must provide notice to individual employees of their right to elect COBRA coverage within 14 days after the administrator has received notice from the employer.
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You must respond to this notice and elect COBRA coverage by the 60th day after the written notice is sent or the day health care coverage ceased, whichever is later. Otherwise, you will lose all rights to COBRA benefits.
Spouses and dependent children covered under your health plan have an independent right to elect COBRA coverage upon your termination or reduction in hours. If, for instance, you have a family member with an illness at the time you are laid off, that person alone can elect coverage.
If I elect COBRA, how much do I pay?
When you were an active employee, your employer may have paid all or part of your group health premiums. Under COBRA, as a former employee no longer receiving benefits, you will usually pay the entire premium amount -- that is, the premium that you paid as an active employee, plus the amount of the contribution made by your employer. In addition, there may be a 2% administrative fee.
While COBRA rates may seem high, you will be paying group premium rates, which are usually lower than rates you would pay as an individual.
Since it is likely that there will be a lapse of a month or more between the date of layoff and the time you make the COBRA election decision, you may have to pay health premiums retroactively-- from the time of separation from the company. The first premium, for instance, will cover the entire time since your last day of employment with your former employer.
You should also be aware that it is your responsibility to pay for COBRA coverage even if you do not receive a monthly statement.
Although they are not required to do so, some employers may subsidize COBRA coverage.
When does COBRA coverage begin?
Once you elect coverage and pay for it, COBRA coverage begins on the date that health care coverage ceased. It is essentially retroactive. In addition, the health care coverage you receive is the same as it is for active employees.
How long does COBRA coverage last?
Generally, individuals who qualify initially are covered for a maximum of 18 months, but coverage may end earlier under certain circumstances. Those circumstances include:
- Premiums are not paid on time.
- Your former employer decides to discontinue a health plan altogether.
- You obtain coverage with another employer's group health plan; (There may be some exception if your new employer's health plan excludes or limits benefits for a "preexisting" condition-basically a medical condition present before you enrolled in the plan. Please see the discussion on HIPAA that follows.)
- You become entitled to Medicare benefits.
Employers may offer longer periods of COBRA coverage but are only required to do so under special circumstances, such as disability (yours or a family member's), your death or divorce, or when your child ceases to meet the definition of a dependent child under the health plan.
Who can answer other COBRA questions?
COBRA administration is shared by three federal agencies:
More details about COBRA coverage are included in the booklet Health Benefits under the Consolidated Omnibus Budget Reconciliation Act. You may obtain telephone numbers for the nearest HHS and IRS offices by calling the Federal Information Center at: (800) 688-9889 or visit http://www.dol.gov/dol/topic/health-plans/cobra.htm.