Health insurance is a very important element of financial security in the U.S., and, in the case of many employees, it is accomplished at the workplace. But what when one loses the job or there have been some important changes in the employment situation? Here the Consolidated Omnibus Budget Reconciliation Act (COBRA) is applied.
The authorization of Consolidated Omnibus Budget Reconciliation Act (COBRA) in 1985 enables individuals and their families to remain covered by the health insurance of their employer group plan following the occurrence of some known qualifying event like loss of job or reduction of working hours or other life events. Yet, although COBRA is a saving grace to people facing the loss of insurance, it is often complicated to manage.
In our upcoming article, we shall go in the nitty-gritty of COBRA and what it entails, how it functions and who qualifies it. In our discussion, we will also consider the advantages and the set-backs of COBRA coverage and we will also give a straightforward guideline on how to make the best out of the significant law. This article will enable everyone going through a career change and those that just want to know more of their rights according to COBRA.
What is Consolidated Omnibus Budget Reconciliation Act (COBRA)?
Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal legislative policy that offers interim continuation of health care benefits with an employer-sponsored group health plan. COBRA aims at helping employees, who lose or have their working hours cut, to enjoy the health insurance cover over a specific duration.
COBRA also allows you to bridge the period between the employer-covered health plan and your new health insurance coverage in the event that you are eligible. This could be very significant to people and the family who would not easily afford to get health insurance when they are alone especially with pre-existing illnesses.
There is usually a 18-month cobra cover though in certain situations it can rise up to 36 months depending on the kind of qualifying event. It is important to mention that, although COBRA enables you to remain with your health insurance cover policy, you will probably be required to pay the complete premium, which may be even costlier than in the past when you were an employee.
Who Qualifies to be a Consolidated Omnibus Budget Reconciliation Act (COBRA) Coverage?
COBRA can be obtained by those people who were covered by a health plan of their employer, and a qualifying event took place. These are the main cases when people can qualify to access COBRA continuation coverage:
Job Loss- Once you lose your job be it voluntarily (resignation) and involuntarily (fired) or lay off, you can be eligible to have the COBRA coverage. Nevertheless, you are not eligible when you are fired on gross misconduct.
Minor Reduction of Work Hours – In the event that your work hours are decreased to the extent that you are no longer entitled in employer sponsored health insurance (such as changing in fulltime to parttime job), you can be covered under Consolidated Omnibus Budget Reconciliation Act (COBRA).
Divorce or Legal Separation –When you or your dependent child are a spouse, or dependent child of a person who was covered under the health insurance plan offered by an employer, and the spouse or the dependent child divorce or lawfully separate, then the spouse or dependent child may be allowed to carry on with his/her health insurance coverage under COBRA.
The Functioning of Consolidated Omnibus Budget Reconciliation Act (COBRA)
Making the journey through COBRA is quite a complex task, yet it is also vital not to lose the opportunity to receive cover. The following is a step-by-step description of the way COBRA operates:
Eligibility to Consolidated Omnibus Budget Reconciliation Act (COBRA)
As soon as you obtain a qualifying event, your company must report to the health plan administrator. When you lose the job or reduce the working hours, your employer is supposed to notify the plan administrator of the change within a period of 30 days.
Getting notification of the COBRA Election Notice
Once your employer informs the health plan administrator, you shall get a COBRA election notice. This is to give you notice on your right to retain your health cover under the employer plan. It will also contain the premiums, the covering levels, and the deadlines on electing COBRA.
Deciding to receive COBRA Coverage
You have 60 days of being sent the election notice in which you should choose to keep your coverage. Missing the deadline means that you might miss out on continuing your health cover under COBRA.
Paying Premiums
After electing COBRA you will be in charge of payment of premiums. Under COBRA, the full amount of the premiums will have to be paid by you and that will be the amount that the employer paid, along with the administration fee of 2 percent. This may be quite a lot higher than what you were paying as an employee.
Maintaining Coverage
In the majority of the cases, COBRA may be effective up to 18 months, however, in some cases, it may be extended (e.g., on the grounds of disability). You should not neglect your payments in order not to lose your insurance.
The merits and demerits of Consolidated Omnibus Budget Reconciliation Act (COBRA)
As with any other advantage, COBRA has its advantages and disadvantages. So what are some of the main merits and demerits of Consolidated Omnibus Budget Reconciliation Act (COBRA).
Advantages of Consolidated Omnibus Budget Reconciliation Act (COBRA) are:
Continuity of Care
Under COBRA, you are required to keep the same health plan coverage you had during work, so you will not have to change doctors or find your way in a new health insurance plan. This could afford you some comfort in the case when you are a patient or you have some health concern.
Dependent Coverage Option You can include the dependent even when they moved out of the house or got married. The dependent can be up to 25 years old.
Suppose your dependents were also covered in the health plan your employer had issued to you, the COBRA will help them maintain it even when you have lost your job. This may become a vital advantage to families dependent on an employer sponsored insurance.
In Transition Peace of Mind
It can be stressful to lose your job or to have the number of working hours decrease. COBRA provides you time and plan to switch to new employer or a new health insurance plan without fear losing it during the process.
Cons of Consolidated Omnibus Budget Reconciliation Act (COBRA):
High Premiums
The cost is the greatest disadvantage of COBRA. You have to pay the entire cost of the premium, which includes that amount your employer used to pay, and coverage can cost a fortune. It is hardly affordable to many people as they lose income.
Short Coverage Periodic time
Although use of Consolidated Omnibus Budget Reconciliation Act (COBRA) enables you to continue enjoying health insurance cover until a maximum of 18 months, it is not forever. When your COBRA cover ends, then you have to seek another cover, and it is not easy.
Limited Options
COBRA coverage is linked to the health plan of your employer, thus the freedom to select other insurance provider or other cheaper covers is dependent on your eligibility to affordability according to the Affordable Care Act (ACA).
Other forms of Consolidated Omnibus Budget Reconciliation Act (COBRA)
High premiums of COBRA can be a too heavy burden, there are a couple of possible other solutions you may want to look at:
Affordable Care Act Plans (Marketplace Health Insurance)
When you lose your job, you are eligible to Special Enrollment Period of the Health Insurance Marketplace. Depending on your income you can seek a cheaper plan using subsidies.
Medicaid
You can receive Medicaid which is a government program to give health care to people with low incomes depending on your income and state of residence.
Small-term Wellness Plans
When you do not require such cover in the long run you may want to look at a short-term health insurance policy. These plans are normally cheaper than COBRA though this may be accompanied by less coverage.
Recommendation: Is (COBRA) the Match To You?
Consolidated Omnibus Budget Reconciliation Act (COBRA) is a useful policy that avails beneficial health insurance cover to individuals and families under transition. It is rather costly but gives continuity of care and peace of mind in a stressful situation.
When you happen to be experiencing a job loss, reduction in hours or any other qualifying event, then you need to consider the benefits and costs of COBRA. See what applies to you, whether that be the Affordable Care Act marketplace or perhaps Medicaid, so as to figure out what would be the most effective option on your behalf.
Tax Laws in USA wants to update your on vital legislation and regulations, that can touch your financial and medical well-being. Be informed, be active and always make the best decisions in your personal circumstances.
FAQ Section
Q1: What is the term of COBRA insurance duration?
A1: The average time that the COBRA coverage will run to is 18 months however an extension of up to 36 months may be granted based on a particular circumstance like disability.
Q2: What is the cost of Consolidated Omnibus Budget Reconciliation Act (COBRA)?
A2: COBRA is normally more expensive than the amount you were paying when you were in employment because you will be required to pay the whole premium inclusive of the part that was paid before by your employer combined with a 2% administration charge.
Q3: I was wondering whether I could have COBRA with the likelihood that I am going to leave my job voluntarily.
A3: Yes, when you voluntarily leave your job, you are still covered by COBRA insurance provided you happened to be under the employer health plan.
To get more information on Consolidated Omnibus Budget Reconciliation Act (COBRA) and updates, click on Tax Laws in USA.
