Dear Tom and Alan:
Hi there. I recently left my job and have been offered COBRA. Is this health insurance? Is it new coverage?
What insurance company will I be covered by with COBRA? What will the plan look like?
A few of my friends have taken COBRA and said it’s very expensive. A little info would be great. Thanks.
Tom: COBRA is the Consolidated Omnibus Reconciliation Act of 1985, which came to be during the Reagan years.
Its original intent was to continue health insurance coverage for widows/widowers who, prior to this act, were dropped by their spouse’s insurance carrier through work.
Al: Keep in mind that for employers with fewer than 20 employees, the mechanism is Cal-COBRA, a bit simpler than federal COBRA. But, please continue.
Tom: Anyway, COBRA is a continuation of your current health insurance and can also include dental, vision, and other coverages.
Your COBRA coverage will be with the same insurance carrier you had with your employer, and with the same benefit plan.
At the time of your termination (voluntary or involuntary) your employer is mandated to send you a COBRA election form within 44 days of termination.
Then you have 60 days to send the form back in order to accept or decline. This is followed by yet another 45 days to pay the first COBRA premium on your own dime.
Yes, it does sound like you’re in “COBRA limbo.” But when the initial premium is paid, your coverage is retroactive to the day when you became inactive on your employer’s plan.
Al: Again, the previous paragraphs refer to how COBRA works with a group of more than 20 employees.
For federal COBRA, the employer has a huge responsibility for the correct paperwork being done in a timely fashion. Many of the larger employers hire a third-party administrator to do the billing.
On Cal-COBRA, the duty of the employer is to contact the insurance company to forward the necessary documents to the employee so that he/she may decide on if Cal-COBRA is suitable. After that, the boss is off the hook.
Where people find COBRA is too expensive is often they don’t realize exactly how much the plan actually costs the employer, since many owners pay at least 50 percent of the premium for their workers.
Tom: However, whether federal COBRA or Cal-COBRA, the cost of the coverage is the same but a 5 percent fee may be added.
Since COBRA often ends after 18 months, there is another consideration for our reader. In order to apply for an individual plan under the Affordable Care Act (ACA), there must be a qualifying event to get coverage unless your COBRA happens to end during the open enrollment period.
The end of COBRA benefits is a qualifying event under the ACA, but if you just drop it before 18 months, it is not a qualifying event.