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COBRA

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Overview

This section provides basic information on how the Consolidated Omnibus Budget Reconciliation Act of 1986 ( COBRA) works to help those insured in group health plans keep their coverage when certain events occur such as switching or leaving a job, ‘aging out’ of parent’s coverage, getting divorced, or gaining eligibility for Medicare.

The basic protection COBRA affords is the right to continued enrollment in a group health plan for a certain number of months after coverage would otherwise end. With a few exceptions, all covered employees and their covered spouses and dependents in groups of 20 or more are guaranteed this right as qualified beneficiaries, provided they pay the former employer (or the COBRA administrator) their full portion of the premium plus a 2% surcharge. In other words, the employer no longer pays part of the cost of this coverage, but COBRA makes the group health plan available for individual purchase.

How do COBRA benefits start?

Employers are required to notify employees about their COBRA rights when they join the group health plan and, most importantly, when they are about to leave the plan because of one of the triggers listed above. Qualified beneficiaries have 60 days from the date the COBRA offer is made to notify the employer of their choice to elect or reject continued coverage. Each qualified beneficiary may elect COBRA coverage for him or herself-or a covered employee or spouse may chose COBRA for any other qualified beneficiaries.

COBRA coverage begins on the date the group health coverage would otherwise end. There is no gap.

How long do COBRA benefits last?

This depends on who the qualified beneficiary is and what event triggered COBRA qualification. When the qualifying event is termination or reduction of work hours, the standard COBRA benefit period is a maximum of 18 months.

If a qualified beneficiary (including a spouse or dependent child as well as the employee) is considered disabled as determined by the Social Security Administration within their first 60 days of COBRA coverage, he or she may extend the COBRA continuation period for an additional 11 months, to a total of 29 months. To be eligible for this disability extension, a copy of the Social Security Administration’s disability determination must be provided to the plan administrator within 60 days of it’s receipt. Note also that the premium will increase 50% more for months 19 to 29.

COBRA lasts for 36 months if the qualifying event is the death of, or divorce/legal separation from the covered employee.

When do COBRA’s protections kick in?

COBRA’s protections are offered to eligible individuals when certain qualifying events occur:

For employees:
  • Voluntary or involuntary termination of employment for any reason except "gross misconduct" or
  • A change in employee's work status to part-time, resulting in the employee's ineligibility for the employer's health plan.
For spouses:
  • Voluntary or involuntary termination of the covered employee's employment for any reason except "gross misconduct"
  • A change in the covered employee's work status to part-time, resulting in ineligibility for the employer's health plan
  • The covered employee becomes entitled to Medicare
  • Divorce or legal separation from the covered employee, or
  • Death of the covered employee.
The qualifying events for dependent children are the same as for the spouse plus:
  • Loss of dependent child status under the plan rules.

Additional tips on COBRA

COBRA is a complex federal law with many more details than described here. Some additional tips are highlighted below. See your health plan administrator or check with the U.S. Department of Labor for more details.

COBRA Eligibility.
Federal law requires every employer with 20 or more employees to offer COBRA benefits. However, many states go beyond this and require smaller group plans and other federally exempted employers to offer COBRA.

Identical benefits.
Qualified beneficiaries must be offered benefits identical to those received immediately before qualifying for COBRA.

Cost of premiums.
There is no standard cost because group health insurance plans vary. However, because COBRA is an extension of group coverage, the premiums will be lower than those for an individual plan. Group health plans are not only less expensive than individual policies, but purchasing an individual policy may not be an option for most people with MS in most states. The employer or COBRA administrator will tell you what your premiums will be at the time COBRA is offered.

Higher premiums for extended coverage.
People on COBRA from months 18 to 29 due to disability will pay as much as 50% more for coverage during that extended period. Your Society chapter may know of resources to help with the cost of COBRA premiums.

COBRA extension.
Although COBRA specifies the period during which coverage must be offered, it does not prohibit plans from offering longer coverage. So, if your COBRA is due to run out and you have no other health insurance, you can ask if the former employer is willing to let you keep paying the premiums to stay in the group plan.

Pay on time.
When you elect COBRA, you are agreeing to pay the premium for continued health benefits for yourself and possibly, your dependents. Failure to pay in a timely manner can result in termination of coverage, and re-instatement is unlikely.

Keep records.
All written information you receive from the former employer or COBRA administrator are legal documents and should be kept for your personal protection.

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Resource

COBRA FAQs

US Department of Labor’s official website on COBRA rules.

Read FAQs

Read FAQs