Enacted in 1986, the Consolidated Omnibus Budget Reconciliation Act, or COBRA, was designed by the US Congress to give continued health insurance to those who lose their coverage under their former employer's group insurance plan.
The loss of group insurance usually results from termination of employment. The law benefits former employees, retirees, their spouses or former spouses, and dependent children.
COBRA beneficiaries are allowed to buy health insurance and pay low premiums that are equivalent to group rates. However, insurance under COBRA may seem to be more expensive compared to what active employees pay for their health coverage under a group plan.
This is because employers normally subsidize a portion of the insurance premiums for their workers. On the other hand, COBRA beneficiaries have to shoulder the entire cost of their insurance. Still, COBRA is more economical than the regular individual health plans.
COBRA qualifications
COBRA has set specific guidelines and criteria on the plan coverage, qualifications of beneficiaries, and qualifying events in which a person could lose health coverage. COBRA covers group health plans of employers that have at least 20 workers under their employ on more than half of their operating days.
The provisions cover full time employees, as well as the part-time workers although their coverage is pro-rated, which means the actual number of hours worked as part-time is taken as a fraction of a full time employee's total number of working hours.
To be qualified for COBRA coverage, a person must have been enrolled under a group health plan for at least a day prior to a qualifying event. The person could be an employee, the employee's spouse or an employee's dependent child. COBRA also covers some cases of retired employees, their spouses and dependent children.
Other participants in the group plan such as the company's agents, independent contractors, and directors may also qualify under the COBRA program.
COBRA has set the specific events to determine a person's qualification for continued insurance coverage. Mostly, the qualification is based on the reasons behind the termination and the employee's attitude towards work.
COBRA-qualified individuals are usually those who terminated their employment voluntarily, those who were let go for other reasons except gross misconduct, or those facing reduction in the number of hours that they are to work.
Qualification for covered spouses is dependent on the eligibility of the covered employee plus other events like the employee's entitlement to Medicare, divorce or legal separation between the spouses, or death of the employee.
COBRA insurance coverage
Generally, COBRA allows its beneficiaries to enjoy the very same insurance benefits they had under their old health plan. Any changes in the plan that benefit the active employees are also applicable to the qualified beneficiaries. The beneficiaries are also allowed to amend their COBRA insurance provided that those amendments are permissible under their old health plan.
Duration of COBRA insurance
COBRA coverage usually runs for 18 months or until such time that the beneficiary is able to obtain a new health plan. In some instances, however, like when other qualifying events transpire while the person is already a COBRA beneficiary, the continued insurance can be carried on for 18 more months bringing the total duration of COBRA coverage to a maximum of 36 months.
See also: Health insurance FAQs
