What is COBRA?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) was established in 1986 and is also known as continuation coverage. COBRA allows qualifying individuals who lose their group health coverage due to certain events like termination of employment to continue their coverage temporarily. Generally under COBRA individuals must pay the full cost of the coverage and a two percent administrative charge. Certain employers may subsidize COBRA fees, but they are not required to do so. As a result, continuing health insurance coverage through COBRA can be costly.
Why Enroll in COBRA?
- Many people enroll in COBRA to offset the expensive costs associated with receiving medical care
- While in between jobs, individuals enroll in COBRA to prevent a lapse in health insurance coverage
- For individuals with a pre-existing condition, COBRA is often the only option to ensure coverage through a health insurance plan
How Do I Know if I am Eligible for COBRA?
Employers are required to provide general information about COBRA coverage when hiring new employees. When a worker is no longer eligible for health coverage through the employer’s insurance plan, the employer must notify the worker of his or her rights to COBRA benefits. These rights may also be extended to the employee’s spouse and dependent children.
Events that may make you or your family members eligible for COBRA may include:
- Termination of employment
- Reduction in number of hours worked
- Retirement
- Divorce or legal separation from the beneficiary
- Death of the beneficiary
- Loss of dependent child status
COBRA and the Affordable Care Act
The Affordable Care Act, also known as Obamacare, requires insurers to sell health insurance to virtually everyone (often called “guaranteed issue”) regardless of health status. As a result, individuals with a pre-existing condition need not enroll in COBRA in order to have healthcare coverage after leaving a job. However, the mandates of the Affordable Care Act do not go into effect until 2014.
Even after the Affordable Care Act goes into effect, individuals may elect to enroll in COBRA since the benefits under their old group health insurance plan may be better than the health plans provided under ACA.
Alternatives to COBRA
Individuals can find healthcare coverage as an alternative to COBRA:
- If your spouse is covered under a group health insurance plan, you may have a right to special enroll without waiting until the next open season for enrollment
- Starting in 2014, an individual can enroll in an individual health insurance plan even with a pre-existing condition
- Individuals and families may become eligible for government programs such as CHIP or Medicaid after one of the COBRA qualifying events