Everything you need to know about COBRA health insurance
Regardless of employment status, Americans across the country are constantly navigating through their health insurance options, to make sure they have coverage that best suits their healthcare needs. And the issue can become all the more pressing when a person’s employment status changes — whether you leave a job voluntarily, are terminated, or even dealing with a change in work hours, the status of your health insurance benefits could be in flux. For many people in the United States, these kinds of life events are when they first learn about something called COBRA health insurance, a form of coverage that lets you keep the insurance you have even if your job status changes.
What is COBRA health insurance?
If you have, and then lose, job-based health insurance through your employer, you may be offered COBRA coverage. To qualify for COBRA continuation, you need to experience a “qualifying event.” Losing your health insurance due to a job loss, whether voluntary or involuntary, counts.There are also other instances where you may qualify for COBRA health insurance. These range from losing coverage as a result of the death of a covered spouse, divorce or legal separation that results in the now-ex spouse losing benefits, a child’s loss of dependent status, a reduction of hours as a result of everything from a slowdown in business operations to a layoff or strike to medical leave. However, the list of qualifying events excludes losing your job due to “gross misconduct”.
In short, if you find yourself facing any of these qualifying events, you might be able to keep the insurance you had by paying 100% of the premiums associated with it (including the part your employer used to pay for you) plus a small administrative fee. For many people, COBRA health insurance is a great way to ensure that you have the coverage you need, regardless of your current employment status. In most cases, federal law will allow you to pay for and be covered by COBRA health insurance for 18 months from the time you lose your employer-provided insurance. However, for some qualifying events (namely, death of a covered spouse or divorce from a covered spouse) you might be able to pay to keep the insurance you once had for up to 36 months.
What does COBRA stand for?
COBRA is an acronym that comes from the Consolidated Omnibus Budget Reconciliation Act, signed into law by President Ronald Reagan in 1985. Among other things, this law made it illegal for certain kinds of employers to take specific tax deductions if they weren’t also offering the option of continued coverage under its employee health insurance plan.
In other words, you can thank this law, and its notable name, for ensuring that you might have the option to pay on your own for and keep your health insurance after leaving or losing a job.
Who qualifies for COBRA coverage?
Under the law that it gets its name from, most types of employers are required to offer continued health insurance coverage to “qualified beneficiaries”. This is the official term used to describe employees, their spouses, former spouses, and any dependent children who might who’s loss of coverage is due to specific kinds of qualifying events, like leaving or losing a job, death of a covered employee, or divorce.
COBRA covers group health plans sponsored by an employer (private-sector or state/local government) that employed at least 20 employees on more than 50 percent of its typical business days in the previous calendar year. Full- and part-time employees all go towards the ultimate headcount for determining what kind of employers are covered by COBRA benefits, with a certain formula applied for tallying part-time employees.
A dependent child who have been covered by their parents’ health insurance coverage are also eligible for COBRA continuation coverage. This happens after they “age-out” or lose their dependent status at the age of 26.
How much does COBRA health insurance cost?
While a great option for a lot of people facing the end of their current insurance coverage, there is a catch — COBRA will cost you. Without your employer contributing to the cost of the monthly premiums associated with this health insurance plan, premiums can be steep. Before your employer was likely contributing a significant amount towards your monthly health insurance premiums. Now you will be responsible for paying those premiums in full, all out-of-pocket — which could translate into a real change in your monthly insurance cost.
Do I have to get COBRA?
It’s always good to know your coverage options — and if you lose your employer-based health coverage, you don’t have to elect COBRA.
As of 2019, federal law no longer requires that you pay a fee or fine (sometimes referred to as the “individual mandate”) if you can afford health insurance but choose not to buy it. However, having health insurance ensures that you are protected from unexpected — and often staggeringly expensive — medical costs. Not to mention that as a result of the Affordable Care Act (ACA), preventive services are covered at no cost when you have an ACA-compliant plan.
So while you don’t have to get COBRA health insurance, and may want to investigate the non-COBRA insurance options you might have, it’s best to stay insured. And when you’re considering your health insurance options, it’s always best to look for an ACA-compliant plan that covers a number of essential health benefits, ensures that you are granted coverage regardless of pre-existing conditions and places certain parameters around costs, helping you stay healthy, physically and financially.
What are some COBRA alternatives?
If you lose your employer-sponsored health insurance for any number of reasons and want to make sure you stay insured but don’t want to do so through COBRA, you do have some options.
Loss of health insurance through your former employer means you are eligible for a Special Enrollment Period to buy your own insurance through the Health Insurance Marketplace in your state. With a Special Enrollment, you can shop for coverage even if you’re outside of the standard Open Enrollment Period. During this Special Enrollment Period, you’ll have 60 days from the time your employer-provided benefits end to enroll in a health plan. Any insurance plan bought through the individual Marketplace will ensure you have coverage for essential health benefits. Plus it will meet the Affordable Care Act’s requirements on limits on consumer spending, meaning that your deductibles, copayments, and out-of-pocket maximums can’t exceed a certain amount in a given year. Depending on your financial status and the kind of plan you want, a Marketplace plan might be significantly cheaper than COBRA health insurance — especially if you qualify for a premium tax credit to further reduce your premium costs.
Searching for a Marketplace plan will also show you if you or anyone in your family qualifies for Medicaid services or CHIP (Children’s Health Insurance Plan) based on your income. You will also find out if you qualify for a subsidy to lower the costs of the plan you purchase through the Marketplace. And if you’re over 65, you would be eligible for Medicare, a form of federal health insurance.
What benefits does COBRA health insurance cover?
According to the U.S. Department of Labor, federal law requires that your COBRA insurance cover the same benefits to those that were included in your plan when you or a covered family member was an active employee. If you elect COBRA, your health insurance plan itself will remain the same. That means your plan will continue to include the same medical benefits that were covered when your insurance was provided by your employer. So keeping your previously held plan through COBRA means that all the same things your insurance used to cover will still be covered, like in-office physician care, inpatient and outpatient hospital care, prescription drugs, and dental and vision care.
Is my family covered under COBRA?
Anyone who previously was covered by your employer-provided health insurance is eligible to be covered under COBRA insurance. So, if you, your spouse and children were all covered previously, the whole family is also eligible to continue this coverage by paying the applicable premiums in full under COBRA. And if the insured employee dies or if there is a divorce, likewise everyone who was once covered is legally entitled to continue their coverage by paying for this same insurance under COBRA.
Does every employer offer COBRA health insurance?
Not every employer has to offer COBRA health insurance, but, generally, most do. The law ensures COBRA eligibility for all health plans offered by private-sector employers with 20-or more employees and by both state and local governments.
Work for the federal government, a church or other religious entity, or a small business with fewer than 20 employees? Your employer may not offer COBRA health insurance— but exact laws can vary by state, and some private-sector employers with less than 20 employees might offer something known as mini-COBRA. You can check with your employer and your state’s insurance commissioner for more information about exactly which employers offer COBRA and in what capacity where you live.
How do I sign up for COBRA coverage?
Once you’ve confirmed your COBRA eligibility and have decided that COBRA health insurance is the right fit for you, signing up is fairly straightforward.
The U.S. Department of Labor states that you’ll have 60 days to notify your insurance company of your qualifying event — like leaving your job. You can work with your employer to find out how to best contact your insurance company with this notification. After you have notified your insurance company of your qualifying event, your insurance company than has 14 days to send you a COBRA election notice, which will give you all the information about your health insurance plan (which should remain identical in terms of benefits to your employer-provided coverage) and its costs (which you will now pay out-of-pocket in full yourself).
After receiving the election notice from the insurance company, you’ll then have 60 days to return the election notice to the insurance company, signaling that you would like to begin COBRA coverage. You won’t pay your first premium when you send your election notice back, but will need to do so within 45 days after the start of your COBRA coverage.
How long does it take for COBRA to kick in?
With all paperwork properly submitted, your COBRA coverage should begin on the first day of your qualifying event (for example, the first day you are no longer with your employer), ensuring no gaps in your coverage.
Legally, if your employer is subject to COBRA requirements, they must notify the organization’s group health plan administrator within 30 days of your last day with your employer. At that point, the plan administrator then has 14 days to notify the former employee of their COBRA rights. Which is why the earlier you can begin this conversation with your company’s HR department, the better — if you know COBRA is the best choice for you, you’ll have more peace of mind knowing everything is all ready to go for your coverage to begin as soon as your existing coverage ends. And anything you can do on your end to help expedite the timeline to elect COBRA health insurance is always a win.
How long can I stay on COBRA?
In most cases, COBRA coverage lasts for exactly 18 months from the date of the qualifying event — and this will be the case if you leave or lose your job, or see a reduction in your hours that results in a loss of your benefits. In instances of death or divorce, COBRA coverage can last for up to 36 months.
When do I need to pay my first COBRA premium?
You’ll need to pay for your first COBRA premium within 45 days of beginning your COBRA coverage, which will begin with day one of your qualifying event. When you receive your COBRA election notice, it will include all the information you need on how much your premium payments are and where to send them and at what time intervals.
After you make your first COBRA premium payment for the first month’s coverage, premiums are then due within 30 days of the due date set by group health plan. Typically, most plans require premiums to be paid by the first of the month to continue coverage for that month.
While all COBRA plans must allow you to make monthly payments for your plan, some may also have the option to make quarterly or even weekly payments. Again, your COBRA election notice will have all the information you need about payments of your premiums, and the payment cycle options available to you.
What happens if I miss my COBRA payment?
You risk losing your coverage if you fail to make your first COBRA premium payment within 45 days of your qualifying event. After you make that first payment, however, there is a 30-day grace period for subsequent monthly premiums. That means you have 30 days after the premium due date to submit payment without losing your coverage.
It’s important to remember, though, that if you make your premium payment not by the due date but within the grace period, the insurance company administering your COBRA plan has the option and ability to cancel your coverage until your premium payment is received. If you make a payment during the grace period, the insurance company can then retroactively reinstate your coverage. Again, if you want to maximize your peace of mind — and eliminate the chance of any gaps in coverage — make sure all of your payments are submitted by their due dates.
Can I lose COBRA coverage?
Fail to make your premium payment even after the grace period? You could lose all your rights to COBRA health insurance, and be left without coverage and few options until Open Enrollment begins for Marketplace plans in the coming year. So make sure you stay on top of your payments to ensure that those are received by your insurance company in a timely manner.
Outside of failing to make your premiums, your COBRA coverage is guaranteed for the 18- or 36-month period for which you qualify for coverage. After that period ends, you will need to find alternate health insurance, should you wish to stay insured. And if you’re interested in other options once enrolled in coverage, you may do so during the standard Open Enrollment Period for Marketplace plans. And if you begin a new job that offers an employer-provided group health insurance plan, you can also terminate your COBRA coverage at that time and start with the new one with your new employer.
Certain life events can bring about changes in your health insurance coverage, so knowing your COBRA eligibility when you start a job can help you be prepared for when those changes come. For most people, it’s a great comfort to know that if your employment status changes, in most cases and with most employers you’ll be able to continue being covered by your same health insurance plan through the use of COBRA. With COBRA health insurance, you’ll have the exact same coverage you had under your employer-provided plan and will be able to keep that coverage, depending on the exact circumstances, for 18- to 36-months by paying the health insurance premiums out-of-pocket and in full each month.
I hear about the advantage of 60 or so days grace period at the beginning of COBRA availability. But what about getting a free month at the end of coverage? For example, my (very expensive) COBRA plan ends on 12/31, at which point I will convert to an ACA plan. If I do not pay in December, but do not incur any claims during that month, my COBRA plan is terminated to the beginning of December and I keep the last payment in my pocket. If something catastrophic comes up in December, I can re-instate COBRA for the month of December.
Does anyone see any holes in this logic?
The fact is that most of the working population in USA depend on their health insurance plans that their companies provide. Every employer, whether a small- or mid-cap business or a big brand tries to keep its employees well-protected. Cobra is a continuation of insurance and is a very good scheme for all the employees.
When converting to Cobra did the employees need
New insurance policy numbers or do they continue to use the same insurance information that has when they were employed?
Same insurance policy numbers, it’s the same plan as when they were employed.
Not necessarily true… son aged out and when he received cobra he was given new numbers for himself while the group number remained the same
New number is assigned while the group number stays the same
Which entity is responsible for reactivating the previous insurance, would it be the previous employer, or the company by which COBRA is offered?
so do you tell your current doctor you now have cobra?
You will need to show your new cards to your doctors … the numbers are different so billing will be a problem if you don’t
If I only have a month gap in coverage, can I just wait it out and see if I incur any medical expenses that require insurance, and then apply for COBRA as long as it’s within the 60 day period? Seems like it’s entirely proper to do that, and I don’t really need to decide right away whether I will need coverage during my one month gap.
Yes, you can do that
How do I cover costs until my COBRA kicks in? My employer paid insurance ended April 30th and I signed up for COBRA 2 weeks ago, with a June 30 deadline. I have not received an invoice yet. Do I pay for drugs and doc visits out of pocket? I know COBRA is retro back to the start date (May 1 for me), but how do I cover these costs now, assuming I get reimbursed. Thank you.
Wait til you get an invoice to pay. You can call your insurer about reimbursement.
I only need COBRA for two days until my new insurance policy kicks in. A hospital visit required me signing up for it. Question is – can I use COBRA for that entire month or am I required to start using the new insurance the first day it kicks in? I paid for the full month so I feel like I should be able to use it.
You can use it for the entire month.
Once you elect Cobra and send in the payment, how long does it take for your medical provider to see that you have active insurance? (i.e., when can the medical provider submit the claim directly to insurance rather than make me pay for service upfront?)
You’ll have to check with your insurance provider on that issue, it varies by insurer.
I submitted my COBRA paperwork, including the 1st month’s payment. When I tried to get medical services, I was told that they could not pre-authorize as my account is not yet active. So, even though I will be eligible for reimbursement, I can’t get the services! How long does it take for the account to appear active once you’ve signed up?
You’ll have to check with the insurer on that question.
If, while you are covered by a COBRA policy, you have some medical condition develop – say, a cancer diagnosis – does another insurer HAVE to pick you up when your COBRA coverage period ends or can they say no? I was once told that it’s better not to use COBRA because the qualifying life event of losing your job guarantees a private insurer must insure you at the time you lose your job, but that same insurer could deny you when your COBRA coverage ends in 18 or 36 months because expiration of COBRA is not a qualifying life event.
Because of the Affordable Care Act, an insurer cannot deny you coverage because of a pre-existing condition. You can use COBRA and then get a Marketplace plan and you will not be denied.
Thanks very much. Your site is quite useful. Appreciate it.
If I was the employee and my spouse was an additionally covered person on my insurance policy, I have the option to cover the both of us, or even potentially only myself, or my spouse, correct? If we only cover my spouse, will previous charges (under her, not me) toward deductible and out of pocket max still count for her, or will she have to start over from scratch?
Typically, a dependent cannot enroll in coverage unless the employee has enrolled.
If you are switching to a new plan, then you’ll have to start from scratch with deductibles and out of pocket max. If you are enrolling in the same plan, then you can keep your existing deductible progress.