COBRA Health Insurance

Although COBRA health insurance is a term generally used, COBRA is not insurance. COBRA stands for Consolidated Omnibus Budget Reconciliation Act. It’s a Federal law that allows employees of eligible groups to keep their insurance (medical, dental, vision, FSA & some HRAs.) An eligible group would have had 20 or more full-time employees for more than 50% of the previous calendar year. For this calculation, two 20 hour employees would equal one 40 hour employee.

COBRA isn’t automatically expensive. It is the full price of what the insurance company charges the employer for the coverage they offer. Employers (ER) are allowed to charge an additional admin fee of 2% of the premium if they choose. Some do, some don’t, but it has to be the same for every employee (EE).

When an EE is terminated (fired, quit, laid-off) or goes to part-time, this is called a COBRA Qualifying Event (QE) and they may be entitled to up to 18 months on COBRA. If an EE dies, divorces, or goes on Medicare, covered spouses/kids have a QE and they may be able to continue their COBRA health insurance coverage for up to 36 months. If a child is no longer an eligible dependent (due to age, student status, marriage), they may be able to continue their COBRA coverage for up to 36 months.

For most group plans, coverage ends the end of the month in which the EE is termed. If the last day they work is on 6/1, 6/2, 6/16, 6/29, or even 6/30, the coverage ends 6/30. It doesn’t matter if the ER has already paid their July premium or not, coverage still ends June 30 and the ER needs to refund the payroll deducted premium to the EE.

ER’s should have COBRA insurance letters sent to the EE within 14 days of the EE term notification.

EE’s have 60 days from the date of the COBRA letter or the date coverage ended, whichever is later, to elect COBRA. After they elect, they have 45 days to pay the initial premiums, though it’s best to pay at election time if possible. COBRA coverage begins the day after regular coverage ends

Example: EE terms 6/29, coverage ends 6/30. COBRA letter is sent 7/5. EE has until 9/3 (60 days from 7/5) to elect COBRA and coverage would be reinstated effective 7/1. If EE elects COBRA 8/10, EE has until 9/24 (45 days) to pay July, August & September premiums. Premiums are due the 1st of each month after that, with a 31 day grace period. If an EE pushed the limits and didn’t elect until 9/2, they’d have until 10/17 to pay 4 months of premium (July thru October.)

An EE with ongoing health problems should elect & pay right away if they have no other group options (i.e., spouse coverage.) An EE with no immediate health concerns can “float” or wait, and elect COBRA only if they have a claim in the election period (provided they haven’t signed to decline COBRA.) Under the above example, if an EE was getting coverage 9/1 on a new job, and they didn’t have any claims in July & August, they’ve saved 2 months premiums and not had a gap of more than 63 days (for HIPAA/pre-existing condition exclusion.)

If an EE has a pregnant wife, she could elect COBRA without him, or a child in the middle of dental work can elect COBRA by themselves, paying the individual rate.

If an EE or covered spouse is Social Security disabled, they can elect COBRA health insurance for up to 29 months.