Around 156.2 million people, or 49% of Americans, get their health insurance coverage through their employers. But what happens when an employee gets laid off or quits? One option is a law called the Consolidated Omnibus Budget Reconciliation Act, or COBRA.
COBRA allows employees to voluntarily continue coverage with that group policy for a limited time until they can get another policy, either through a job or on their own. COBRA, in essence, is temporary unemployed health insurance. Here, learn everything you need to know about COBRA and health insurance.
Companies with 20 or more employees as well as state and local governments who provide a group health plan to their employees are required to offer COBRA health insurance to the employee, employee spouses, former spouses and dependent children in certain circumstances once employment has ceased. This includes:
- The death of a covered employee
- The termination or reduction in hours of a covered employee’s employment for reasons other than gross misconduct
- Divorce or legal separation from a covered employee
- A covered employee becoming eligible for Medicare
- The employee’s child losing dependent status
If the employer goes bankrupt, retired employees, their spouses and dependent children may also be covered. Children born to or placed for adoption with a covered employee during continuation coverage are automatically considered qualified beneficiaries.
If COBRA is needed because of divorce, legal separation, Medicare eligibility or a child losing dependent status, the employee must notify the plan about the qualifying event, usually within 60 days. Instructions for how to do this must be given to employees along with the rest of the policy’s paperwork.
If you are unsure about how to do this, you can contact your company’s Human Resources department or whoever is responsible for administering employee benefits.
The following are not covered by COBRA:
- Employees of small companies with fewer than 20 employees
- Employees of companies that do not offer health insurance coverage as a benefit
- Employees who are fired because of gross misconduct, such as stealing
- Employees of the federal government
- Employees of certain church-related organizations
Some states have laws similar to COBRA health insurance, which may cover employees of small businesses. Contact your state insurance commissioner’s office to see what unemployed insurance benefits are available to you.
The unemployed health insurance benefits must be exactly the same as those under the policy for current employees. Employees who elect COBRA benefits pay up to 102% of the cost of the policy each month. This is usually more than they previously paid when they were employed because most employers who provide health insurance subsidize part of the cost as a benefit of employment.