COBRA Benefits

If you are in danger of losing your job, or otherwise losing employer sponsored health insurance benefits, then you should be aware of the COBRA benefits that are available to you under U.S law.

COBRA Rules

COBRA stands for the "Consolidated Omnibus Budget Reconciliation Act." The U.S. Congress passed the Act in 1986 as a way to provide workers with a way to continue group health coverage after they lose their regular eligibility. Former employees who fall under this act are those who were employed by a business with over 20 employees.

The following class of worker may be protected by the COBRA Act:

• Full time employees
• The employee's spouse
• The employee's children, including adopted children
• In some cases, a retired employee or immediate family
• Independent contractors or anyone else who participated in the employer group health plan

Any of these individuals qualify when an employee is either voluntarily or involuntarily terminated from their job (unless it's for "gross misconduct") or if the employee has reduced hours that limited health benefits. Additionally, dependents qualify if the employee becomes entitled to Medicare benefits, dies, or if the employee divorces the spouse.

The good news is that if you are a qualifying former employee or relative of such an employee, the health plan benefits must be identical to the same benefits as you had before you were terminated. These COBRA benefits include:

• Co-payments limits
• Deductible limits
• All other coverage limits

If you've been terminated and you are considering signing up for extended coverage under COBRA, make sure that you have a copy of the policy benefits that you enjoyed as an employee, because under COBRA you must maintain those same benefits.

The downside of this Act is that while it protects employees who are at risk of suddenly losing health insurance for themselves and their families, the price is sometimes unmanageable for many former employees. This is because, while you were employed, your employer probably covered a bulk of the premium cost. If you elect to continue coverage of COBRA benefits, you end up paying the entire group premium rate. This amount includes what was formerly the employee portion, the part that the employer paid and potentially a 2 percent administrative fee. While this will be significantly higher than when you only had to pay the employee portion, it's usually also far less expensive than if you tried to purchase an individual health plan all on your own. Group health insurance policies are almost always significantly discounted from independent policies.

A few additional notes about COBRA benefits:

• Keep in mind that electing COBRA coverage will cover you and your family starting from the date that you are terminated. This also means that if you opt for COBRA benefits, you'll be expected to pay the premium starting from your date of layoff.
• Since COBRA covers you and your family from the date of layoff, you can rest assured that if you need medical care after you leave work, you'll still be covered by the policy.
• When you are terminated, your existing employer sponsored health plan should send you information about how to elect COBRA coverage. If you don't receive it, make sure to call your HR department for enrollment information.
• As part of the 2009 stimulus package, you may qualify for a reduced premium. Or if you were formerly denied as ineligible, you may now be eligible for coverage. The changes cover anyone terminated from their job, and who meet current eligibility requirements, between September 1, 2008 and December 31, 2009. Contact the Department of Labor for more information/

If you can somehow afford to pay for COBRA benefits during your transition from your last job to the next, you will be able to look for your next job without the added stress of worrying about high medical costs due to lack of health insurance coverage. COBRA provides former employees with the peace of mind that comes with knowing that even though you're temporarily out of work, you and your family will still be taken care of in the event of an illness or injury, without putting your family into unnecessary debt and financial turmoil.

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