Are you about to lose your job and access to health insurance? Are you unsure of when your insurance runs out? Or has the Human Resources department handed out a pamphlet on COBRA? Understanding how you will have access to health insurance is critical to your financial decision making in the coming months. Dealing with unemployment is bad enough, but going without health insurance can destroy your finances overnight if you end up in the hospital.
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What exactly is COBRA health insurance and how does it work? COBRA coverage is given that name due to the legislation that created this health insurance option: the Consolidated Omnibus Budget Reconciliation Act of 1985. The legislation requires employers that offer group health insurance to allow employees the option of temporarily continuing their insurance if they lose coverage due to being laid off or terminated.
COBRA coverage options do not qualify just employees. The insurance option is extended to the spouse and dependents as well.
How long your COBRA option lasts depends on what qualifying event happens:
As critical as health insurance is you would think COBRA would be required for all employers. However, that’s not true. This is critical information if you think you would be eligible for COBRA insurance coverage when it turns out that you do not. (You would need to acquire insurance on the healthcare marketplace as soon as possible in that case.)
What employers don’t have to provide COBRA insurance?
To see if your employer provides COBRA coverage, simply check in with your Human Resources or Benefits department.
When your employer provides a group health insurance plan to its employees, it normally picks up all or part of the cost of the insurance plan for the employee. Instead of paying $1,000 per month for insurance you end up paying $200 per month. When you engage your COBRA health insurance option the employer is no longer going to subsidize your health insurance so your cost is substantially higher. Exactly how much more expensive your COBRA plan will be to your subsidized employer health plan depends on your specific situation, but expect a much higher cost each month. However, even expensive COBRA insurance is better than going without insurance at all.
Medicare can play an interesting role in allowing certain qualified beneficiaries to receive COBRA insurance. If the covered employee becomes eligible for Medicare, a qualified spouse or qualified children will be allowed to extend their insurance coverage through COBRA.
There are a few complications to electing COBRA insurance. How long you have to elect coverage is dependent upon who is electing coverage and why the need for COBRA coverage came about.
Here are a few timelines to consider: