What is COBRA?

When you hear about COBRA insurance, it refers to the Consolidated Omnibus Budget Reconciliation Act of 1985, which was passed during the Reagan years to protect employees and their loved ones from sudden loss of health insurance. COBRA requires most employers that offer group health insurance plans to temporarily continue health coverage to employees and previously covered loved ones for certain qualifying events. Essentially, COBRA provides a buffer for employees who have been let go from their jobs and it also protects an employee’s spouse and children in cases of death and divorce. COBRA generally applies to all group insurance plans of employers that employ more than 20 people.

COBRA allows for the continuation of health insurance benefits of qualifying individuals for various time periods, depending on the qualifying events. The qualifying events COBRA refers to include the death of a covered employee, the termination of an employee (unless the employee was terminated due to a gross misconduct), an employee’s reduction of hours, the divorce or legal separation of a covered employee from the employee’s spouse, or the covered employee becoming eligible for Medicare Benefits.

Qualified beneficiaries of COBRA include a covered employee or the spouse or dependent child of a covered employee.

In the case of the death of a covered employee, the spouse or a dependent child is entitled to up to 36 months of continued group health coverage under COBRA. The same time allotment goes for the divorce or legal separation from the covered employee.

When a covered employee has been terminated for a reason other than a gross misconduct, or if the employee’s hours have been reduced, the covered employee and the spouse or a dependent child can get up to 18 months of continued coverage. This also applies when an employee’s hours have been reduced.

If a covered employee becomes disabled during the first 60 days of COBRA coverage due to a qualifying event, the employee, as well as any nondisabled beneficiaries of the covered employee can receive up to 29 months of continued coverage.

COBRA insurance has protected a lot of people since being passed, but the key thing to remember about COBRA insurance is that while it allows for the continued coverage of qualified individuals and their beneficiaries, it does not mean that employers have to continue the payment of the insurance premiums. Qualified employees and their beneficiaries may be subject to paying up to 102% of the insurance premium.

It’s great that COBRA ensures that people will have insurance even when bad life circumstances get in the way, but there are also other options under the Affordable Care Act for individuals who are looking at COBRA insurance. Make sure you know what the options are before you automatically assume the costs that COBRA insurance will entail.