COBRA: Your Questions Answered

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Have you heard of the Consolidated Omnibus Budget Reconciliation Act, otherwise known as COBRA? If you’ve recently lost employee health insurance benefits due to being laid off or had your hours reduced, you’re likely eligible for COBRA health insurance.

But how does COBRA work? Will you continue to receive the same coverage that you did before, at the same cost? Should you sign up?

Many people who have recently become eligible for COBRA have questions, and we have answers. Take a moment to read through our guide to the COBRA basics so that you can make well-informed decisions about your health care during this next step in your career journey.

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How does COBRA work?        

Passed in 1985, COBRA is a federal law that allows employees of certain companies to continue their healthcare coverage after they stop working for their employer.

If you elect COBRA coverage, you’ll stay on the same health plan that you were before, unless your employer makes company-side changes to employee health plans after you become eligible for COBRA. You won’t need to change doctors and you’ll retain your benefits, including coverage for preexisting conditions and any medications that you use regularly.

Who is eligible for COBRA coverage?

Three primary factors determine whether you’ll be eligible for COBRA:

  1. The size and type of company you work for. Generally, to qualify for COBRA, the employer must be a state or local government agency or a private-sector company with 20 or more employees. Federal agencies are generally exempt from COBRA.
  2. Whether you were enrolled in a company-sponsored group health insurance plan on the day before the qualifying event occurred that caused you to lose health coverage. Qualifying events include being laid off or let go (unless due to gross misconduct), or having your hours reduced. In addition, the following are qualifying events for spouses and dependent children:
  • The covered employee became entitled to Medicare.
  • The covered employee passed away.
  • The covered employee divorced or legally separated from the spouse.
  • A dependent child loses coverage due to turning 26, the maximum age for being covered under a parent’s insurance plan.
  1. Whether your employer still offers its employees a health plan. If you’ve lost your coverage because your employer went out of business or cancelled health benefits for all employees, you won’t be eligible for COBRA.

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What deadlines should I know about?

If you’re eligible for COBRA, you won’t be enrolled automatically. The COBRA process follows a timeline that requires you to take action at specified times. This includes:

30 days: The employer has 30 days to notify the plan administrator of a qualifying event. However, you must notify the administrator if the qualifying event is a divorce, legal separation, or child’s loss of dependent status.

14 days after employer notice: The plan administrator must send an election notice to you no more than 14 days after they receive notice of the event.

60 days: Each qualified beneficiary has 60 days to decide whether to sign up for COBRA.

18 months: Qualified beneficiaries are entitled to at least 18 months of COBRA coverage when the qualifying event is the employee’s loss of employment or a reduction in hours. For other qualifying events, the minimum amount of coverage is 36 months, and in some cases, you may receive an extension. However, coverage may be terminated early if you fail to pay your premiums on time.

How much does COBRA cost?

Under COBRA, insurance premiums are paid in full by the employee. Unfortunately, that means that you’ll likely be paying more for your health insurance than you were before you qualified for COBRA, when your employer paid a percentage of the premium—often as much as 90 percent. Individual insurance policies tend to cost less, but can also mean higher deductibles and fewer benefits.

When deciding whether to enroll in COBRA, compare the cost with that of other options, such as your spouse’s insurance, Medicaid, the Health Insurance Marketplace, or the military.

The Aliat Difference

If you own a small business with fewer than 20 employees, but would still like to offer COBRA, consider joining Aliat. Because Aliat is a large company, small companies who partner with us have access to the COBRA benefit. We also take care of all the administrative work for employees enrolling in a COBRA medical plan.

For more information, contact us.