How Does COBRA Work?

COBRA is not nearly as scary as the snake it might make you think of. COBRA stands for Consolidated Omnibus Budget Reconciliation Act. It is a federal law designed to help workers keep their health insurance. It allows individuals to continue to use their group plan coverage in a variety of situations, including if an individual:

  • quits work, is laid off, or is fired (not for gross misconduct)
  • has his or her hours reduced so the worker no longer qualifies for the group plan
  • becomes legally separated or divorced
  • has a child who no longer qualifies as a dependent under the plan
  • becomes disabled
  • dies
  • becomes eligible for or enrolled in Medicare.

These life events are covered by COBRA for a specific amount of time, depending upon the circumstance.

How to Get COBRA Health Insurance

Employees hoping to receive COBRA benefits need to tell Human Resources or their insurance administrator within thirty days of one of the above events. Beneficiaries of the employee have up to 60 days to elect COBRA after one of the qualifying situations listed above.

Once you have let the appropriate person at your former place of employment know that you wish to elect COBRA, they must send you a notice within 14 days. After the notice is received, you and your beneficiaries have up to 60 days to decide whether or not to claim coverage. After that 60-day period, the right to those benefits are lost.

COBRA lasts for a maximum of 18 months in most situations, but can end earlier under specific circumstances.

COBRA Insurance Costs

There are additional costs associated with getting COBRA insurance, so it is important to determine whether another insurance option is better or more affordable. Your employer can charge you the entire premium plus an extra 2% administrative cost. As insurance costs increase, the premium you pay will also increase. However, you will receive the same benefits you received when working under your employer.

Disadvantages of COBRA

While COBRA can be a great option if you have excellent insurance and have been laid off or need some extra time to sign up for new benefits, it may not be the right fit for every worker. There are drawbacks to COBRA benefits, including the additional fees one incurs when utilizing this service.

Be sure to research all of your insurance options before deciding upon COBRA – and make sure to get new coverage before your COBRA coverage expires.


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