The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that extends your current group health insurance when you experience a qualifying event such as termination of employment or reduction of hours to part-time status. The extension period is 18 months and some people with special qualifying events may be eligible for a longer extension. To be eligible for COBRA, your group policy must be in force with 20 or more employees covered on more than 50% of its typical business days in the previous calendar year.
What is Considered a Qualifying Event?
You may be deemed eligible for COBRA if any of the following events occur:
- Your employment ends unexpectedly unless dealing with any sexual misconduct.
- If you are considered a covered spouse with the covered employee and you legally separate.
- Your hours are suddenly reduced to the point where you may not qualify for group coverage.
- You become disabled or suddenly eligible for Medicare.
- If you are the covered spouse or child of the covered employee and they passed away.
If you are between jobs and you are considering not paying for COBRA health insurance benefits, you may need to look at alternative interim insurance coverage. While COBRA may not be your best option for health insurance, less expensive medical plans may be an important and necessary expense. Be sure to check with your consumer or employer for current information.
What is Continuous Coverage?
Continuous coverage is defined as continuous health insurance coverage with no lapse of more than 62 days. If you go more than 62 days without coverage, you may have to suffer the full waiting period for pre-existing conditions. For example, if you were taking High Blood Pressure medication, you may have to wait 12 months after starting and paying for the new insurance before the insurance would cover the High Blood Pressure medication.
All new health insurance plans are allowed to force new subscribers to suffer a 12-month waiting period for pre-existing conditions. Fortunately, there is another law that allows for portability of coverage without having to suffer pre-existing condition waiting periods. That law says that if you have had continuous coverage for the 12 months prior to and leading up to the beginning of the new insurance coverage, you will be given credit toward any new pre-existing condition waiting period. If you had 6 months of continuous health insurance coverage prior to taking out your new policy, 6 months would be applied to the 12-month waiting period and bring the new pre-existing condition waiting period down to 6 months. If you had 12 months of continuous coverage, you would not have any waiting period for a pre-existing condition on the new health insurance plan.
What Happens if COBRA is too Expensive?
COBRA might be too expensive for you. However, you can get a high deductible individual plan that will satisfy the continuous coverage requirements at a much lower cost. Some short-term insurance plans do not meet the requirements to satisfy the portability law.
Indemnity policies, PPOs, HMOs, and self-insured plans are all eligible for COBRA extension; however, federal government employee plans and church plans are exempt from COBRA. Individual health insurance is also exempt from COBRA extension, which may be another reason to pursue participation in group health plans, if possible.