What does COBRA Insurance stand for?

COBRA Insurance stands for the Consolidated Omnibus Budget Reconciliation Act.

What is COBRA Insurance?

COBRA insurance essentially allows for certain 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?

As previously mentioned, COBRA rules in 2018 essentially 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. The coverage is available for individuals who get laid off or get their hours reduced. Although, 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 though, as COBRA rates in 2018 are usually less than individual short-term plans available in the private marketplace.

Is every employer required to provide COBRA?

Yes, most plans are covered. According to the Department of Labor, COBRA health insurance applies 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 2018. Although, part-time employees are counted as a fraction compared to their full-time counterparts. Plans that are sponsored by the federal government or by religious organizations do not apply.

COBRA continuation coverage & COBRA health insurance

How to get on COBRA Insurance

There are three aspects of qualifying for COBRA health insurance. You have the plans, qualified beneficiaries, and qualifying events. The program establishes specific criteria for each element.

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.

In essence, a qualifying event is merely an event that leads to an individual losing their health coverage. There are a number of different types of qualifying events. Each type of event determines who the qualified beneficiaries are, along with the time a plan must offer health coverage to them through COBRA.

COBRA & You: Qualifying

To qualify for COBRA insurance, you need to follow the following criteria:

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

Your spouse can qualify for COBRA 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 are eligible as well 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

Guaranteed Benefits with COBRA

Under COBRA coverage, qualified beneficiaries are entitled to be offered identical coverage to what is available for similarly situated beneficiaries that are not under a COBRA health insurance plan. Any change in benefits to the plan for active employees would then result in a change to all qualified beneficiaries. As such, qualified beneficiaries must be given the opportunity to make the same choices just like the non-COBRA beneficiaries of the plan are given. One example is being given open enrollment periods by the plan.

How much does COBRA Cost?

COBRA Insurance Cost 2018

The cost of COBRA insurance in 2018 varies depending The answer varies depending 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 11 months 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.

As well, each plan must allow every qualified beneficiary to pay his or her premiums on a monthly basis if asked to do so. However, the initial payment must be made within 45 days of when the employee elected to COBRA insurance.

How long does COBRA Insurance last?

Each case is different, but COBRA 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.

COBRA & the government

Numerous government agencies administered 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 the 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.

Health Insurance Alternatives to COBRA

It’s important to weigh all of your options before deciding to utilize the resource. According to the Department of Labor, there possibly may be alternatives to COBRA in 2018 out there that suit your specific needs.

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) lost 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.

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?

In order 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.

COBRA Insurance doesn’t have to be complex

It’s important to understand the main COBRA guidelines in 2018, 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 within the industry to find the best solution for you or your family.

If you still have questions in regards to COBRA health insurance, give one of our licensed agents a call today at 1-855-614-5057. They’ll be able to explain all of this information in great detail and be able to answer all of your queries.