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Health Insurance Guys: COBRA or not?
Health Insurance Guys

Health Insurance Guys: COBRA or not?

  • Updated
Tom Schrette and Alan Cash

Tom Schrette and Alan Cash

Dear Tom and Alan:

I am leaving my employer, actually retiring, at the end of the year.

I’m 63 and not eligible for Medicare yet. My employer’s human resources department tells me I am good to go with COBRA when I leave.

I am not sure what kinds of coverage COBRA will be or how much it will cost me. I am also wondering if I can keep it until I get on Medicare, and then I can see if Medicare is cheaper than COBRA or maybe I can stay with COBRA.

Anyway, I am trying to make a decision based on zero information and any help would be better than the none I have now.


Tom: Here goes, Nils: the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) applies to employers that have purchased a group health plan for their employees.

COBRA requires the employer to provide continuing health insurance for an employee due to layoff, termination (voluntary or involuntary) or a reduction of hours making him/her ineligible for coverage.

Al: Since Nils’ company has an HR department I’m going to assume there are more than 20 employees. If so, he benefits from federal COBRA and the company is responsible for all the paperwork.

In the case of fewer than 20 employees, he would be subject to Cal Cobra, where the company’s main duty is to have the insurance company contact the employee who would then have the responsibility of completing the paperwork (or not).

Federal COBRA is for 18 months with a possible extension of an additional 18 months for certain qualifying events.

Cal Cobra allows coverage for 36 months. A sobering fact of life in today’s business climate is that if the company goes under, health insurance goes away for everyone.

Tom: Generally, 30 hours per week is what is required by most employers to be eligible for group benefits.

This doesn’t mean that an employer is required to offer benefits to employees, but if the employer offers to one eligible, he/she must offer to all eligible. The feds can be strict about discrimination.

Regarding the benefits and rates, Nils is eligible for the plan he has on his last day of coverage.

Generally speaking, the monthly plan premium will be 102 percent of the total gross rate the employer is paying for the plan now. He can also figure out what his COBRA rate will be if a personnel policies and procedures manual has the employer and employee contribution to premium.

By the way, extensions are also available for dental and vision plans under COBRA.

Al: If Nils’ COBRA runs out in 18 months and he’s still not 65, then he has guaranteed coverage for a health plan when he exhausts his COBRA. It is a “qualifying event.”

Finally, we can promise Nils that he will be very happy to get off whatever under-65 plan he is on and get onto Medicare. The savings will be enormous and the coverage probably better.

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