COBRA – What Is It and How Does It Work?
COBRA – What Is It and How Does It Work?
COBRA allows you to continue your healthcare coverage for up to 18 months. With COBRA certain people with a disability are allowed 11 additional months. And, even if you choose not to extend your health insurance coverage immediately after you leave your job, you have a grace period in which you can still enroll.
Todays question: What is COBRA and how does it work?
The simple answer is: Its an opportunity to continue your employer-sponsored health insurance when you lose your job.So, COBRA isnt the venomous, yet charming snake.
Under federal law, COBRA gives you the right to temporarily continue purchasing the group health insurance you had at work when you leave your job due to a qualifying event.
COBRA stands for Consolidated Omnibus Budget Reconciliation Act – which explains why they call it COBRA.It applies if your company’s group health plan covers 20 or more workers, and in instances of a qualifying event. These events include having your hours cut, quitting your job, or being let go for a reason other than gross misconduct, like stealing. In general, COBRA allows you to continue your coverage for up to 18 months.
Certain people with a disability are allowed 11 additional months. And, even if you choose not to extend your coverage immediately after you leave your job, you have a grace period in which you can still enroll.
Lets say Gary loses his job due to cutbacks because nobody is buying his companys battery-operated flyswatters.
Because losing your job is a qualifying event, Gary can use COBRA to cover himself and his wife, provided she was covered in his health plan at work. Gary’s wife can continue to use COBRA if Gary becomes entitled to Medicare and gives up his group coverage, if there is a divorce or legal separation, or if he goes to that great golf course in the sky.
Dependent children who were covered by his plan can use COBRA in those same cases. They can also extend their coverage when they are no longer considered dependents.
When you use COBRA, you are responsible for paying 100% of the cost, plus an administrative fee. That means you pay what you paid as an employee, plus what your employer paid, plus 2%.
Individuals who are eligible for COBRA except those who left their jobs voluntarily may qualify for a 65% subsidy for nine months.
Lets say Gary is laid off from Global Flyswatters, Inc. between September 1, 2008, and December 31, 2009.
He is now qualified to get COBRA coverage for just 35% of the total cost even if he already declined it. That means, if Gary’s health insurance cost his company $300 a month, and cost Gary $200 a month, his total insurance cost was $500 a month.
Under the new stimulus plan, Gary would be eligible for COBRA for just $175 a month. He’s eligible as long as he isnt what they call a high-income individual that is, a single tax filer with an adjusted gross income of $125,000 or more, or a joint filer with income over $250,000. Not a problem for Gary. To sum it up, when you leave your job due to qualifying events, COBRA gives you the opportunity to continue purchasing the group health insurance you had for yourself and your dependents for a limited time when you leave your job due to a qualified event. Normally, you pay 102% of the cost. But with the new stimulus package, qualified individuals are entitled to a subsidy that covers 65% of the total.
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