MightyRecruiterLosing a job is stressful enough without having to worry about whether you and your family are going to be covered by a health insurance plan. If you had been covered by an employer-sponsored health plan and no longer have the job, you can stay covered under the plan thanks to a federal law called COBRA, the Consolidated Omnibus Budget Reconciliation Act.
Eligible Circumstances for COBRA
While COBRA provides continuing health coverage, it is not available for everyone. It only applies to businesses that had a minimum of 20 employees in the previous year, and certain religious organizations and federal plans are not covered. Employees who have been fired for gross misconduct are also usually not eligible for COBRA.
There are a number of circumstances that allow you and your immediate family to be covered by COBRA. These include the following:
- You quit or lose your job.
- Your hours are reduced.
- There is a transition between jobs.
- The employee passes away.
- You get divorced or are legally separated from the employee.
- Your age no longer qualifies you as a dependent. COBRA coverage is available for adult children up to the age of 26.
- The covered employee becomes entitled to Medicare.
Amount of Time That Employee Is Covered Under COBRA
COBRA continues health insurance coverage from a previous job, but it is meant for only a limited amount of time. If you are eligible for COBRA you have 60 days to decide whether or not you want to continue coverage. If you do, coverage will be extended from the qualifying event date for a period of 18 or 36 months.Employees who were terminated or had a reduction in hours are entitled to 18 months of coverage. Other qualifying events are entitled to 36 months of extended coverage. COBRA coverage can be extended past the 18-month maximum period for a couple of circumstances. One is when a qualified recipient is disabled and the other is when a second qualifying event occurs. These two situations result in coverage extension for a maximum period of 36 months.
Cost of Coverage
COBRA is not a cheap health coverage plan. In most circumstances you are required to pay the costs that were paid by the employer and employee plus two percent for administrative costs. Most beneficiaries end up spending 102 percent of the plan’s cost. Those who receive an extension from the 18-month time period often are required to pay up to 150 percent of the plan’s cost. In some cases, employers may offer to pay for the health coverage or subsidize a portion of it for terminated employees as a part of the severance package.
Financial Help With COBRA Payments
If the premiums required to continue with COBRA are too high, there may be financial assistance available. As with other health coverage plans, certain individuals may be entitled for an income tax credit that is available toward monthly premium payments. There is also a Health Coverage Tax Credit (HCTC), which is a tax credit that is refundable on your income tax returns.
Termination of COBRA
There are a number of reasons why COBRA may be terminated before the original end of the maximum extension period. Some of these reasons include the following:
- A qualified recipient obtains coverage under a different group health plan, either through a new job, an individual health plan, or through a spouse.
- A qualified recipient becomes eligible for Medicare benefits after electing COBRA coverage.
- The employer doesn’t continue with any group health plan.
- A qualified beneficiary participates in misconduct such as fraud.
- Plan premiums are not paid on a timely basis. Your coverage may be reinstated by calling your plan, but this is not guaranteed.
Maintaining health coverage is important. Take advantage of this information and your own research to determine what steps you should take to ensure your coverage after loss of employment.
Legal Disclaimer
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.