What does COBRA Insurance stand for?

COBRA Health Insurance stands for the Consolidated Omnibus Budget Reconciliation Act.

What Is COBRA Insurance?

COBRA Health Insurance essentially allows employees to continue to receive their health coverage even after leaving the company. This monumental act was passed in Congress in 1986 and was officially helmed by Ronald Reagan. It ushered in sweeping changes to the health care sector by amending the Employee Retirement Income Security Act, the Internal Revenue Code, and the Public Health Service Act.

How Does COBRA Insurance Work?

COBRA rules in 2021 extend an employee’s job-based health insurance plan after they’ve left the organization. This provides the opportunity to continue receiving health coverage at the lower group rates for a duration of time. COBRA Health Insurance is available for individuals who get laid off or get their hours reduced. However, there are some cons to COBRA, so let’s break down the facts.

Employees who leave the company have to pay the full price of the monthly premium, which can be rather costly. This is due to the fact the company usually pays part of the premium, but the individual is now responsible for paying the full amount. There is a silver lining, as COBRA rates in 2021 are usually less than individual short-term plans available in the private marketplace.

Is Every Employer Required to Provide COBRA? 

According to the Department of Labor, COBRA Health Insurance applies to all employers with more than 20 employees “on more than 50 percent of its typical business days in the last calendar year.” Both full and part-time employees are counted in regards to see if a plan is subjected to COBRA insurance costs in 2021. Plans that were sponsored by the federal government or by religious organizations do not apply for COBRA. 

How to Get COBRA Insurance

Obtaining COBRA Health Insurance breaks down into three parts. You have plans, qualified beneficiaries, and qualifying events. The program establishes specific criteria for each element.

According to COBRA insurance rules, a qualified beneficiary is someone who is covered by a group health plan before a qualifying event occurs. This could be an employee, an employee’s spouse or an employee’s dependent child. Occasionally, a retired employee, a retired employee’s spouse or a retired employee’s dependent children can become qualified beneficiaries.

A qualifying event is an event that leads to an individual losing their health coverage. There are several types of qualifying events. Each type of event determines who the qualified beneficiaries are, along with how long they will be covered through COBRA. 

Cobra Insurance

Who Are Candidates for COBRA Health Insurance?

Candidates for COBRA Health Insurance include: 

Employees

To qualify for COBRA Health Insurance, you must meet the following criteria:

  • Voluntary or involuntary termination of employment that does not involve misconduct
  • Reduction in the number of hours, which disqualifies the employee from health coverage

Spouses

Spouse can qualify for COBRA Health Insurance according to the following criteria:

  • Voluntary or involuntary termination of the covered employee’s employment for any reason besides gross misconduct
  • Reduction in the hours worked by the covered employee below plan eligibility requirements
  • Covered employee becoming entitled to Medicare
  • Divorce or legal separation of the covered employee
  • Death of the covered employee

Dependent Children

Dependent children are eligible under COBRA insurance rules under these guidelines:

  • Loss of dependent child status under the plan rules
  • Voluntary or involuntary termination of the covered employee’s employment for any reason other than gross misconduct
  • Reduction in the hours worked by the covered employee below plan eligibility requirements
  • Covered employee becoming entitled to Medicare
  • Divorce or legal separation of the covered employee
  • Death of the covered employee

How does COBRA Insurance work if I quit my job?

Regardless of the situation – whether you quit your job or your employment is terminated – you have the option to sign up for coverage.

Guaranteed Benefits With COBRA

Under COBRA Health Insurance, qualified beneficiaries will be offered identical coverage to what is available for similarly situated beneficiaries. Any change in benefits to the program for active employees will change your COBRA coverage. As such, eligible recipients must be given the opportunity to make the same choices, just like the non-COBRA beneficiaries of the plan are given, such as open enrollment periods.

Pros and Cons of COBRA Coverage

Pros: When you opt-in for COBRA, not only do you retain coverage for preexisting conditions and regular prescriptions, you can continue seeing your physician and medical network providers. It is possible for its cost to be lower than other standard policies on the market and is much better than staying uninsured.

Other benefits of COBRA Coverage include: 

  • Shields you from sudden life changes
  • Gives coverage for you and your loved ones 
  • Same plan, filing process and coverage

Cons: If you must pay all of the insurance coverage, COBRA can be quite expensive. Another disadvantage is you are dependent on your past employer for your insurance coverage. For example, if they opt to discontinue the plan, ex-employers and their beneficiaries will no longer have access to COBRA. 

If your employer does change their health insurance plan, all COBRA recipients must accept the modifications, even if it doesn’t meet their needs. 

Other cons of COBRA Coverage include: 

  • Set amount of time for coverage
  • Hefty costs
  • COBRA might not be available to you if you worked for a small company

How Much Does COBRA Insurance Cost in 2021?

The cost of COBRA Health Insurance in 2021 depends on your employer’s health insurance plan. In most cases, beneficiaries are required to pay for their own COBRA coverage. A premium cannot go over 102 percent of the cost of the plan when compared with an individual in a similar situation who did not have a qualifying event. This includes both the portion of the plan paid by employees and the portion of the plan the employer paid before the qualifying event, outside of the two percent administrative costs.

If a qualified beneficiary receives an 11-month disability coverage extension, the premium for those additional months can be increased up to 150 percent of the plan’s total cost for coverage. While premiums may be increased in COBRA Health Insurance plans, this is typically fixed to each 12-month premium cycle.

Each plan must allow every qualified beneficiary to pay his or her premiums every month if asked to do so. However, the initial payment must be made within 45 days of when the employee elected for COBRA insurance.

How to Apply for COBRA Coverage

Confirm that you had the right plan: You must have been part of a group plan offered by your employer to qualify for COBRA.

Prove that you had a qualifying event: A qualifying event can include termination, the loss of a loved one covered by a company group plan, or the loss of hours. Note that it is not a QLE if you lost your job due to gross incompetence. 

Confirm that you are a qualifying recipient: A qualifying beneficiary is any family member who was on the employer-provided healthcare before their QLE. Beneficiaries can apply for coverage separately. For example, if a parent goes on Medicare, their child can apply for COBRA.

Evaluate your COBRA election notice: Within 14 days of you notifying your insurance company of your QLE, it must provide you with a COBRA election notice, which gives you the necessary information about your coverage and cost. 

Sign up for COBRA: Return the COBRA election notice to your insurance company within 60 days. The first premium payment may be required as early as 45 days after the beginning of coverage.

How Long Does COBRA Insurance Last? 

Each case is different, but COBRA Health Insurance generally provides 18 months of coverage from the time the individual has officially departed the organization or has had their hours reduced. This extends to the dependents who rely on the insurance.

Furthermore, if you’re disabled within the first 60 days while utilizing this resource, both you and your beneficiaries are eligible for up to 29 months of coverage. If the covered employee dies or there’s a divorce or legal separation while using COBRA insurance, the spouse and beneficiaries are eligible for up to 36 months of coverage, according to the Department of Labor.

What Other Coverage Options Does Cobra Offer?

COBRA insurance rules apply to dental and vision insurance as well. It is important to note that you will only be eligible for COBRA dental insurance if you enrolled prior to employment termination. This means that if you waived dental coverage with your employer, termination does not make you or your family eligible for CORBA. 

If your health insurance includes dental, you will be required to continue both coverages, even if you only desire to keep one or the other.

COBRA Dental Coverage

Coverage can be provided for up to 18 months or until the beneficiary reaches the age of Medicare, whichever comes first. Coverage may be extended if it is determined you or your dependents are disabled under the Social Security Act provisions regarding disability. 

The determination of disability must occur within the first 60 days of COBRA dental coverage. If qualified, coverage may be extended for up to 29 months. After the continuation period has commenced, and a spouse or dependent has another event that would entitle them to their own coverage, coverage may once again be extended. However, in no situation will a continuation of coverage last for more than 36 months from the first COBRA event that qualified for coverage.

The full monthly premium will be your responsibility, however. This includes any portion your employer may have paid previously as well as an administrative surcharge of 2%. Although you must pay for COBRA dental insurance, the premiums will likely reflect a group rate, making coverage more affordable than if you were to purchase a new dental insurance plan.

The exception, however, would be if coverage is extended beyond the initial 18 month period due to disability or a secondary qualifying event. If coverage continues beyond 18 months, you will be responsible for 150% of the premium. Payment is due within 45 days of first choosing to extend coverage. After that, insurance carriers provide for a 30 day grace period to make payments.

If you, as the employee, decide not to continue with COBRA dental insurance, your spouse, partner, or children can still purchase the coverage. Just like you, they will need to accept coverage within 60 days of the qualifying event. In addition, if any covered individual were to marry while covered, the spouse may be added at any time. Newborns may be added within 30 days of their birth.

COBRA insurance rules require the ability to convert your COBRA dental insurance to a direct pay individual or family plan. Benefits of the COBRA dental insurance program must be exhausted before conversion. If you do not make timely payments, cancel coverage, or let coverage lapse, eligibility for conversion is withdrawn.

COBRA Vision Coverage

As COBRA insurance varies depending on what your employer’s insurance plan provides, it may cover costs towards vision care. Check with your insurance provider to ensure you are covered. 

COBRA And The Government 

Numerous government agencies control COBRA Health Insurance. For example, the Department of Labor and Treasury has jurisdiction over all the private-sector health plans and coverage. On the other hand, the Department of Health and Human Services controls the continuing coverage laws for public-sector health plans and coverage.

The Labor Department is responsible for interpreting and regulating the disclosure and notification of COBRA requirements. The Internal Revenue Service (IRS), along with the Department of the Treasury, has issued regulations on numerous COBRA provisions — most related to eligibility, premiums, and more.

Early Termination of COBRA Coverage

You can lose your COBRA coverage in the following cases: 

  • Failure to pay premiums
  • Your previous employer cancels your group health plan
  • Gained coverage under another group health plan
  • Are eligible for Medicare benefits
  • Engaging in misconduct, such as fraud

Health insurance alternatives to COBRA for 2021

It’s important to weigh all of your options before deciding to utilize the resource. According to the Department of Labor, there may be alternatives to COBRA in 2021 out there that suit your specific needs.

1) Purchase a Health Insurance Plan Through The Marketplace

One alternative is to obtain a special enrollment, which means you could purchase a plan through the marketplace. Under the Health Insurance Portability and Accountability Act, if you (or your dependent) lose their health insurance, you can apply for special enrollment and can shop around for a plan. You have to apply for special enrollment within the first 30 days following your qualifying event. Otherwise, you will be rejected and have to wait until the Open Enrollment Period. We always recommend using an insurance broker to help you shop around.

Marketplace plans can offer a wide range of cost-sharing reductions and tax credits, which can partially subsidize your monthly premium. This could potentially lead to substantial savings in the long-run and can be a viable alternative.

2) Buy a Health Plan Through an Insurance Agent

Many Americans opt to find health insurance on their own. Working with a licensed insurance agent is an easy way to ensure you are getting the coverage you need, and a price you can afford. 

3) Ask Your Spouse to Put You As a Dependent 

According to healthcare.gov, if you can count someone as a dependent on your taxes, they can also be dependent on your health insurance plan. After getting married, you usually have 60 days to enroll in a new plan or add your spouse as a dependent.

4) Buy a Short-Term Health Plan

If you are in between jobs, a short-term plan may be the perfect option for you. This is especially true if you did not elect for COBRA! Short-term health plans give you the benefits of being insured at a low cost and have quick results. If you qualify right after your application is complete, your coverage can begin in less than 24 hours.

5) Check Whether Your Children Are Eligible For Coverage 

Your beneficiaries, such as your children, will be eligible for COBRA if: 

  • Your work hours are reduced
  • You’ve left your job under any circumstance except gross misconduct
  • Your child loses dependent child status under the employer-sponsored health plan’s guidelines
  • If you become entitled to Medicare
  • You divorce or legally separate
  • You die

Sign-up For Coverage with a New Employer

While you can cancel your COBRA coverage at any time within the 18-month window, you will likely drop COBRA once you become eligible for a different health plan through a new employer. Once you stop paying premiums, COBRA coverage ends automatically.

Utilize Your Spouse’s Plan

This is an excellent option if your spouse is employed, and their company offers health insurance. In many instances, joining your spouse’s plan can save a lot of money in the long run while you’re unemployed. It’s important to always calculate the cost of the monthly premium increase. Your partner’s coverage might differ from your old plan as well, so it’s best to read the fine print and fully understand the new conditions and benefits.

Medicaid

If you’ve lost your job, you may be eligible for Medicaid. This provides health coverage to low-income individuals who would otherwise be uninsured. Medicaid is controlled by each state but is federally regulated, meaning coverage and eligibility varies depending on where you live. You can always find out more at HealthCare.gov to see if this is a viable option.

Trade Unions or Alumni Associations

A lot of individuals often overlook this option, but it’s always best to do a bit of research and make a few phone calls to see if this is available. Many college alumni associations offer health insurance plans, meaning you can join their plan by simply paying a monthly premium. Several trade unions also provide the same coverage, meaning you can purchase insurance through your specific union. Several other options for different professions exist, so it’s best to reach out to the union and ask a few questions.

Tax Credit 

Depending on your circumstances, individuals who utilize COBRA Health Insurance may qualify for the Health Coverage Tax Credit (otherwise known as HCTC). According to the Department of Labor, those who are eligible for the HCTC tax credit include employees who’ve recently lost their job due to “the negative effect of global trade.” They also have to receive benefits under the Trade Adjustment Assistance (TAA) Program and receive pension payments from the Pension Benefit Guaranty Corporation (PBGC). Those who qualify for the HCTC can claim it on their income tax at the end of the year.

How does an individual file a COBRA claim?

To file a claim, your health insurance company has to provide an explanation on how to access benefits and how to process claims. According to the Department of Labor, you should submit a claim following these rules regulations.

FAQ 

Why is COBRA so Expensive?

Simply put, COBRA is expensive because your employer is no longer helping with the cost of your coverage. COBRA insurance is usually more costly than marketplace insurance, as there is no financial assistance from the government to help you pay premiums.

How much is average COBRA Health Insurance per month?

Kaiser Family Foundation concluded that in 2019, the average annual premium for employer-sponsored health insurance family policy was more than $20,000. Without an employer paying into the coverage, those same employees would pay an average of more than $20,000 plus an up to 2% administration fee for COBRA. While the cost is high, knowing you and your loved ones are covered is priceless. 

Where Can I Get More Information About COBRA?

It’s important to understand the main COBRA guidelines in 2021, as this can be a great resource in the event you no longer have health insurance. We always recommend reading over the above information and contacting an expert to find the best solution for you and your family.

If you still have questions regarding COBRA Health Insurance, give one of our licensed agents a call today at 1-844-903-3629. They’ll be able to explain all this information in great detail and be able to answer all of your queries.