What is Cobra Insurance and How Does It Work?
Cobra insurance is also known as extended leave or temporary continuation of coverage, depending on your company and state regulations. It provides health insurance for a specified period following termination of employment, retirement, or another event that triggers loss of coverage under your company’s plan. Let’s take a closer look at how this works.
Cobra stands for the Continuation of Benefits (Coverage) Act and is also referred to as the COBRA program. It is a temporary plan that offers group health coverage to people who leave their job or cease to work on account of some specific reasons.
Cobra insurance helps employees meet the high costs of continuing medical services when they leave or are terminated from work. In order to qualify for this plan, one must meet certain criteria. This article explains everything you need to know about Cobra insurance and how it works.
Cobra FAQ
What Is Cobra Insurance?
Cobra medical insurance refers to the continuation of health care coverage that an employer is required to offer its employees who will be temporarily unable to work due to a medical condition. It’s a federal law that requires most companies to offer COBRA coverage to employees and their dependents if the employee is between jobs or is laid off and has exhausted their continuation coverage from their previous employer.
The federal law that created COBRA, the Consolidated Omnibus Budget Reconciliation Act (COBRA), requires employers to offer COBRA continuation coverage to employees who are no longer covered under their employer’s group health plan due to certain qualifying events. When someone loses their job, their health coverage usually ends as well. But COBRA allows them to continue their health insurance coverage for 18-36 months, depending on their situation. COBRA premiums are typically much higher than the individual’s contribution while they were working.
How Does Cobra Insurance Work? How to get Cobra Insurance?
If you are an employee and are covered by Cobra, you will receive a notice when you need to start paying for Cobra. The notice will also tell you how much you need to pay as the premium. You will receive the Cobra notice 90 days before your coverage ends. If you do not take any action, your Cobra coverage will end on the day specified in the notice.
If you are the covered person, you will get a notice from your health plan. The notice will tell you that the plan has been “activated” and that you have 60 days to respond. That is when you will decide if you want to continue coverage through the Cobra plan. But remember, if you do not respond within 60 days, you will lose your coverage.
Who Can Benefit From COBRA?
If you lose your insurance after being laid off, becoming disabled, or reaching retirement age, you may qualify for COBRA. This kind of insurance helps cover the cost of health insurance after you lose your job or retire, so you can continue to visit your doctors and receive the care you need.
COBRA, though, comes with a hefty price tag. Depending on the type of health insurance you have, the monthly premium can range from $200 to $2,000+ a month. You can also incur additional fees and charges, like a one-time administrative fee or a tax surcharge.
What Is The COBRA Coverage Period?
Cobra insurance coverage ends after a designated period of time, and the exact length of this period will vary based on the reason behind the need for Cobra. In most cases, the coverage period is up to a year, but it can be longer if you are disabled.
If you retire and qualify for Cobra, you will have 36 months of coverage. You can also voluntarily end your Cobra coverage at any point during the coverage period. However, you will still have to pay the full amount of Cobra premiums for the entire period that you received coverage.
How much is Cobra insurance? How much does Cobra cost?
The amount of Cobra insurance will depend on the health plan that is offered by your former employer. There is no standard amount that you will have to pay for COBRA coverage. The amount that you will have to pay will depend on the plan that you are on, which will vary from person to person. Depending on the type of health insurance you have, the monthly premium can range from $200 to $2,000+ a month.
How to Continue With Cobra After Leaving Your Job?
If you are the covered person, you will get a notice from your health plan. The notice will tell you that the plan has been “activated” and that you have 60 days to respond. That is when you will decide if you want to continue coverage through the Cobra plan. But remember, if you do not respond within 60 days, you will lose your coverage.
If you are still employed, you will have to wait until you are no longer covered by your employer’s group health plan before you can take advantage of Cobra. The exact date when you will lose coverage will vary depending on your situation. If you are covered by COBRA, your coverage will not begin until the date when you lose your employer’s coverage.
How to Cancel Cobra Insurance?
You can cancel Cobra Insurance by notifying your previous employer or the plan administrator in writing, requesting to terminate the insurance. After you stop your COBRA insurance, your former employer should send you a letter affirming termination of that health insurance. You can then shop for your different health insurance options with a licensed advisor to find a health insurance plan that best suits your needs.
Alternatives to Cobra Insurance
There are two groups that may not be eligible for Cobra. These groups include people who are not currently employed and people who are not currently covered by their employer’s group health plan. If you qualify for Cobra, it is important to know that this is a temporary measure. If you can’t afford the premiums, you might want to explore other options
COBRA alternative: If you are in a situation where you need health insurance but Cobra is too expensive, you may want to consider a private health insurance plan. This is a great solution to obtaining affordable major medical insurance outside of Cobra or an employer plan because you can enroll any time of the year. Being that the premiums are not based on income like the ACA, you can qualify for a preferred monthly rate for being healthy. Think of it as a safe driver's discount, but for health insurance! These plans are also a tax write-off for the self-employed.
COBRA alternative: One option would be to sign up for a plan through the public health insurance marketplace. This is a good option if you qualify for government assistance or have major ongoing preexisting conditions that need to be covered. You would need to wait for open enrollment to get on a public marketplace plan unless you have a qualifying life event that puts you in the special enrollment period.
COBRA alternative: Another option is to apply for government assistance, such as Medicaid or Medicare. You may be eligible for these programs if you are low-income and uninsured.
Conclusion
Cobra insurance is a government-mandated private health insurance coverage that some companies provide to their employees who are out on leave or have left the company on account of some reason. Cobra insurance is meant to tide over the employees till they find a new job or get back on the job.
There are other great health coverage alternatives to COBRA that offer affordable, PPO coverage for certain individuals. It is very important to weigh out all of your options and find the insurance plan that suits your unique situation. To work with a licensed advisor for free to review your options, contact Emmanuel Lopez, Top Tier Coverage Advising's very own!
757-281-8178
