Defining COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a program that lets eligible employees and their dependents continue their employer-sponsored health coverage if they were let go or fall under the number of hours to remain covered.
Employers with 50 or more full-time employees are required to provide health insurance coverage and help with premiums. An employee becomes ineligible for the health coverage when they are let go or working under the number of hours required. COBRA gives the ex-employee the option to continue on their current health plan for a limited time as long as they continue making the premium payments on their own.
To qualify for COBRA, the employee must have been enrolled in an employer-sponsored health plan by the day before the qualifying event occurred. Qualified events are voluntary or involuntary job loss and a decrease of working hours that no longer allow the employee to qualify. The health plan had to have been effective at least 50% of the business days the year prior. If the employer stops offering health insurance or goes out of business, the ex-employee will not qualify for COBRA.
The main point of COBRA is that the ex-employee continues on the coverage that they were already getting when employed. Therefore, any changes that the employer makes regarding the health plan will be the same for the ex-employee. So, if the employer were to change the plan or get rid of it entirely, the former employee would have to deal with that. This is why continuing on COBRA may not be the best option for everybody. The plans that are being put into action may not serve you or your family. There is a 60-day period where you can decide to continue on the plan and if you choose not to, you have those 60 days to change your mind. If you decide to opt-in, you will be covered by COBRA for 18 to 36 months depending on the qualifying event.
COBRA insurance is given at a group rate and while that may seem like a deal, it ends up being quite expensive. That is because the employer no longer assists with the premium payments and the full financial burden is left on the ex-employee. However, COBRA can sometimes be cheaper than individual health insurance. It is always advised to research and find the best plan for your circumstances.
The COBRA program can be a great option for those that are no longer being covered by employee-sponsored health insurance. However, it may not be the best plan for your needs, and may be too expensive to manage for some.
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