What is COBRA health insurance? Consolidated Omnibus Budget Reconciliation Act (COBRA) is a law that was passed by Congress in the mid 1980s that gives some employees and their dependents the ability to continue receiving health insurance coverage even after leaving employment. There are many times when you need to continue to receive private health care even though you may have lost your job. Health insurance is expensive, but COBRA health insurance can help you cover the gap in coverage until you find a new job with adequate health insurance for you and your family.
Who Is Eligible For COBRA?
An employee and their immediate family is eligible for COBRA health insurance coverage if one of the following qualifying events occurs that results in loss of benefit coverage:
- Death of the covered employee
- Employee loses coverage due to involuntary termination
- Employee loses coverage due to a reduction in hours as a result of resignation, discharge (except gross misconduct), layoff, strike or lockout, medical leave, or slowdown in business operation
- Divorce or legal separation that terminates the ex-spouse’s ability to receive coverage
- A dependent child reaching the age when he is no longer covered
What Do You Get With COBRA?
COBRA allows for coverage up to 18 months in most cases. However, if the individual is considered disabled by the Social Security Administration, coverage may continue for 29 months.
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COBRA does not apply, however, if the employer ended the benefits program altogether, or the employer has gone out of business. The reason for this is that COBRA simply allows the individual to continue on the employers same plan without cost to the employer. If there is no plan, there is no way to get COBRA coverage.
COBRA also does not require the employer to continue to pay for the cost of medical coverage. As a result, the individual utilizing COBRA health insurance will have to pay the full cost of coverage (both what the employee previously paid, as well as what the employer subsidized). Some states have stepped in to provide benefits in cases where COBRA does not provide coverage.
Because the employer does not subsidize the cost of COBRA health insurance, it is expensive. As a result, only 10% of those eligible utilize the program. To change that, in 2009, legislation was passed to provide subsidies for individuals who could not afford care under COBRA. However, the legislation has not been renewed for future years, and as a result, individuals will once again have to shoulder the full cost of health care.