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COBRA: How to Keep Health Insurance When You Lose Your Job Part 1

Several million Americans receive health insurance coverage through their employers. For these people, the notion of losing their job and the health policy is distressing. The 1985 Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law which makes it possible for people who lose their jobs to continue the insurance coverage provided by the previous employment. This is usually for a short period of time at a particular cost. The remaining part of this article covers essential basics of COBRA health insurance.

This program is meant for group health plans sponsored by organizations that have twenty or more workers. It allows employees and their dependents to extend the group health policy after the loss of a job. Your employer may not provide COBRA insurance for you if your job loss was due to gross misconduct. Gross misconduct refers to reckless, willful or wanton behavior on the part of the worker. This law is not applicable to certain church programs, federal employees, companies with less than 20 employees and the District of Columbia. Small businesses may be able to receive continuation at the state level.

An employer that cancels all its health plans or closes the business is no longer obliged to maintain your COBRA coverage. You will also lose your benefits if you move outside the area that is covered by the health plan.

This coverage goes into effect the moment you lose your job voluntarily or involuntarily. Individuals are permitted to extend coverage for themselves and their dependents for up to one and a half year. There are other situations apart from job loss that may require employers to provide this coverage. Dependent children and spouses of individuals who have attained Medicare eligibility, become divorced or separated legally can have health coverage continued for up to three years. If your dependent children lose their dependent status on your health policy, they can receive 36 months of COBRA health insurance.

If you qualify for Social Security disability, lose your employment and other requirements, you can receive up to twenty nine months of COBRA insurance.

Under this plan, the offer for the continuation of the policy is made by the employer but the employer is not mandated to make the payments. You will have to pay the total amount of the coverage which includes what you paid when you had the job as well as your employer’s previous share of the payment. Your employer may also ask you to pay up to 2% to cover administrative expenses.

The monthly payments may be costly for someone who does not have a job but it is much cheaper than what you would have paid for an individual policy. The premium is calculated with the group policy rate and it is much cheaper for you especially if you have a pre-existing health condition.

This is the first in a 2 part series about COBRA health insurance and how it can help you stay covered when you lose your job. Stay tuned for the next episode or sign up for our RSS feed.

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