The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that gives employees the opportunity to continue to receive coverage under their employer’s health care plan while out of work. Basically, if someone loses their job, they can remain covered under their last employer’s group health plan until they find another job. It also allows for continuation of coverage in the event of divorce or death of a spouse.
This law applies to employers with 20 or more employees. However, it does not apply to the federal government or certain religious organizations.
Under COBRA, benefits generally continue for 18 months, but in some instances they can be continued for 29 or 36 months.
The main difference between regular coverage and COBRA is that, under the latter, employers have no requirement to pay for any of the cost of continuing coverage. The unemployed individual is required to pay for the coverage themselves, along with a 2 percent administrative charge.
Why Should I Enroll in COBRA?
While COBRA coverage isn’t cheap – the participant pays 100 percent of the premiums plus an administrative fee – it does provide a safety net while out of work.
But how important is it to have COBRA coverage? Consider the fact that health care costs continue to rise and, for someone with a family to support, an uncovered health issue could be financially crippling. COBRA allows participants to have the same rights and privileges as active employees under their ex-employer’s group health plan. This means that COBRA participants can continue, add or change their benefits. They can even add or remove dependents from coverage.
Another nice perk of COBRA is that, even if you enroll on the last day you are eligible, your coverage will be retroactive to the date you lost coverage under your employer’s plan. If you incur medical expenses during this election period, you can legally elect COBRA before the 60-day deadline, and those bills would be covered.
Bear in mind that COBRA regulations continue to be adjusted in order to ensure that benefits are affordable to participants. If you have questions about COBRA, please talk to your company's Human Resources or Benefits office.
This article is intended to provide accurate and authoritative information on the subject matter covered. It is distributed with the understanding that FBMC is not rendering professional or medical advice and assumes no liability in connection with its use.