All About COBRA
The Consolidated Omnibus Budget Reconciliation Act of 1985 gave us the law we now know as “COBRA.” COBRA guarantees that health insurance can continue for qualified individuals after a change in employment status. This means, in some cases, you can maintain your health insurance coverage after you have a change in your job. However, there are specific guidelines and regulations for who is eligible for COBRA, as well as how lost coverage can be continued.
Who is eligible for COBRA and when?
- COBRA coverage is for the employee, spouse, or dependent children who were covered by an insurance plan before the “qualifying event” (change in your job).
- A “qualifying event” happens when a person loses health insurance coverage under an employer's health plan. The type of qualifying event dictates who can continue coverage and how long they can have this coverage (see chart below).
- “Qualifying events” can include: leaving a job (quitting or being fired), reduction in work hours, divorce, death, or no longer being considered a dependent child.
- If you become disabled, you can maintain coverage for 29 months. You are eligible for Medicare coverage 24 months after your disability date (decided by the Social Security Administration). You must inform your insurance plan administrator as soon as you are disabled to trigger this extension.
How does COBRA work?
- Your employer must inform you of your rights to maintain health insurance coverage within 44 days of the qualifying event. PAY ATTENTION TO THE DEADLINE as you MUST inform the plan administrator within 60 days AFTER the qualifying event of your intent to maintain coverage through COBRA.
- COBRA can be expensive. It is likely your employer will no longer be paying any part of your healthcare plan, so you are responsible for the entire cost of the group plan coverage.
- If you do not pay your COBRA premium, you will lose your coverage.
- You can also lose your COBRA coverage if the employer stops offering health plans to all employees or if the employer goes out of business.
What other options do I have for health insurance if I can’t afford COBRA?
- You can buy an insurance plan during the annual ACA Marketplace open enrollment period (annually in November/December). You may be eligible for premium tax credits and financial help (called cost-sharing) for these plans, depending on your income.
- Investigate if you are eligible for Medicaid before electing COBRA coverage.
- Do not drop your COBRA coverage until your new ACA Marketplace plan is effective (usually January 1 of the following year).
- There are special rules about COBRA and plans through the Healthcare Marketplace. Remember that the Marketplace is typically for people without insurance. If you have COBRA coverage, you have insurance. Outside of annual open enrollment for ACA plans, you cannot drop COBRA coverage just because a less expensive plan may be available through the Marketplace.
- But, when your COBRA coverage ends you will have a special enrollment period for the Marketplace outside of open enrollment.
Qualifying Event What has to happen for you to have COBRA coverage? | Qualified Beneficiaries Who can be covered by continued COBRA coverage? | How long can COBRA be continued? |
Termination of employment or reduction in hours of employment | Employee Spouse Dependent Children | 18 months |
The covered employee becomes eligible for Medicare | Spouse Dependent children | 18/36 months |
The covered employee is determined to be disabled by SSA | Disabled employee Spouse Dependent children | 29 months |
Death of employee | Spouse Dependent children | 36 months |
Divorce or legal separation | Spouse Dependent children | 36 months |
Loss of dependent child status under the plan | Dependent children | 36 months |
*Amount of time depends on when Medicare entitlement occurs; before or after the qualifying event
It is important to communicate with your human resources department/benefits manager any time there is a change in your employment status. Planning ahead and exploring all your options for maintaining your health coverage is very important.
Resources for More Information
- US Department of Labor
- COBRA and the Marketplace