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Health Insurance
Understanding Cobra
Consolidated Omnibus Budget Reconciliation Act is a unique law that came into effect in 1985. This landmark Act benefits heath insurance policy holders by making it mandatory for a group-based health insurance policy owner to maintain their group-health insurance coverage for a period that extends to 18 months from the date of his or her termination from employment.
Losing group-health insurance can be tough because in most cases employer will be paying the full premium or the employee pays up only part of the insurance cost, which is highly beneficial. Losing it suddenly can be very difficult, which is why learning about COBRA coverage is important.
Most companies offering health insurance to their employees must follow this act. It’s been noted that there are situations wherein the time period for coverage is extended beyond 18 months, to a period of 29 months or even 36 months. It is mandatory for employers to inform employees to whom they are offering insurance that they have the option of buying heath insurance through COBRA. Employees will also be notified about the cost of such coverage and have a period of 60 days from the time they are notified to accept COBRA coverage.
COBRA coverage has enabled employees to buy health insurance at a much lesser rate than in an individual health insurance policy, even though their employment has been terminated. The former employee has to as per law pay up to 100% of the cost of their insurance every month, and this includes a 2% surcharge as well. If the former employee had mentioned dependents on the insurance policy, they will also get coverage. The only aspect to affect COBRA coverage is if the employer changes their health insurance plan for employees altogether.
COBRA coverage can come into effect for reasons other than termination of employment. It can come into effect for dependents of a covered employee who suddenly dies, divorce or because a child already under coverage loses the dependent child status.
One thing to keep in mind about COBRA coverage is that it is a temporary effect. After the grace period is over, you will be without any health insurance, which is really a dangerous situation. It is better to get it either through an individual health insurance policy or through another job that provides group-based health insurance rather than be faced with the situation of paying up expensive medical bills all by yourself.
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