What You Need to Know About COBRA Health Insurance?

What would happen to your health insurance if you lost your job? You probably haven’t thought about it. If this did happen to you, then maybe you have heard of COBRA Health Insurance.

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Personally, I have never lost a job but I have known friends and family that have. Especially in today’s economy, there is no such thing as job security.Therefore, knowing something about COBRA could be helpful.

COBRA Basics

So what is COBRA? COBRA is a federal law that stands for the Consolidated Omnibus Budget Reconciliation Act of 1985.

The law requires that some employers offer the right to continue identical health insurance to employees and their families who have had a qualifying event.

A qualifying event may include:

  • Voluntary or involuntary termination.
  • Change from full-time to part-time status.
  • For spouses and other dependents of the employee could be from the employee’s death, divorce, legal separation, and eligibility for Medicare.
  • For an employee’s children, loss of dependent status due to the plan’s limitations or marriage.

The beneficiary (employee, spouse, dependent) has a 60-day window after the qualifying event to choose to continue health insurance and 45 days to pay the premium for the period prior to the election.

How long does COBRA last?

Health insurance coverage to the beneficiary ends at:

    • 18 months
    • 29 months if beneficiary is totally disabled during the first 60 days of COBRA coverage.
    • 36 months if a second qualifying event happens during the first coverage period.
    • The date the plan terminates for all employees.
    • The date the premium is considered overdue.
  • The qualified beneficiary becomes covered on someone else’s plan.
  • The widowed or divorced spouse remarried and becomes covered under the new spouse’s health insurance.

At the end of the coverage period, the beneficiary must be offered the right to convert to an individual plan. What the plan is may change depending the rules of Obama Care (The Affordable care Act).

The Cost of COBRA

COBRA is very expensive. Current law required that the cost not exceed 102% of the current plan. So basically, you should expect your premium to double if you have to use COBRA.

Initially, I recommend that you take the COBRA and then search an individual plan. You may find that depending on your health, you may be able to find a less expensive plan on the open market.

Moral of the Story

If you are unfortunate enough to be offered COBRA, you should take it until you find another job or a less expensive individual plan. You may take a big hit in your monthly budget, however, not having health insurance is a BAD option. One big health care event could bankrupt you.

Question: Have you ever had to use COBRA? If so, were you glad you chose it?