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Cobra Health Coverage Explained

cobra health insurance cobra in grass

 

The Consolidated Omnibus Budget Reconciliation Act of 1985 (also known as “COBRA”) is a law that was passed by the United States Congress and was signed by President Ronald Reagan. The purpose of the law is to create (among a number of other provisions) an insurance option that will allow an employee to continue their healthcare coverage even after they have left their employment. 

The basics of COBRA health coverage

When an employee signs up for healthcare benefits, they expect that this coverage will take care of their necessary medical needs and those of their family. All-in-all, medical insurance is considered the most important benefit that can be provided by an employer.

In the past, it was expected that an employee’s medical coverage would come to an end after their company no longer employed them. However, in 1986, this changed with certain provisions laid down. Allowing employees who lost their company medical coverage, due to termination or fewer work hours, to still be able to sign up for group coverage for a limited period of time. This way, they and their families would still have medical coverage.

According to the law, if someone is entitled to COBRA medical benefits, their health plan must provide notice that they are eligible for these benefits. An employee will have 60 days to either accept COBRA coverage or they will lose that right to its benefits. Once COBRA coverage is chosen the employee will usually have to pay for COBRA coverage.

cobra health insurance forms with stethoscope

Some specifics regarding COBRA

When Congress passed the COBRA law in 1986, the law amended the Employee Retirement Income Security Act (also known as ERISA), The Public Health Service Act and the Internal Revenue Code. This was ultimately designed to allow for the continuation of healthcare coverage in situations where that original healthcare coverage would come to an end. Those who can be covered include; retirees, former employees and their spouses and dependent children. While continued coverage can still be obtained at group rates, COBRA coverage is only available in light of specific instances. In addition COBRA medical coverage is generally more expensive than current employee coverage. That’s because active employee medical benefits are partially paid for by the employer and COBRA coverage premium is paid for in it’s entirely by its participants. However, COBRA coverage is usually less expensive than an individual’s healthcare coverage policy.

One of the law’s provisions covers group healthcare plans that are maintained by a company that has 20 or more employees (in the previous year). While the law doesn’t apply to plans sponsored by the Federal government and certain religious organizations, it applies to plans sponsored by local and state governments and those in the private sector. 

What COBRA actually covers

A qualified COBRA beneficiary must be allowed to have the same coverage that was available prior to the continuation coverage.

For instance, a beneficiary while employed may have had; prescription, hospitalization, vision, dental and other medical benefits, under a single or multiple plans. On the day that they qualify for COBRA coverage, they must be given the opportunity to continue their coverage under one former health plan or any of the separate employer health plans that may have previously been in effect.

There are also limitations that pertain to core medical benefits (hospitalization, primary doctor’s care, etc.) and those benefits that are not considered core benefits (vision and dental). In most cases, a beneficiary may choose to maintain core benefit coverage along with non-core benefit coverage. However, they do not have to be given the opportunity to continue non-core coverage without the core benefit coverage. An exception to this involves a situation in which only non-core benefits were the ones that were carried under the original policy.

cobra health insurance with hands on top

Taking advantage of COBRA coverage or opting out

According to a Commonwealth Fund analysis, only about 10% of former employees opt to continue their healthcare benefits through COBRA coverage. The reason for this rests with the fact that the costs associated are considered too expensive. In many cases, COBRA costs can reach hundreds of dollars per month. Needless to say, this can be rather difficult during a time when you have just lost your job.

Therefore, it can be said that one of the biggest challenges someone face’s who has just lost their job is maintaining their healthcare insurance. This is why it’s so important to consider all of your options. If you have an employed spouse who has healthcare coverage, your best bet may be to join their plan. Additionally, you may also qualify for a government-funded program, should your income be low enough. In some cases, you can also find a reasonably priced healthcare policy, depending on your age and state of health.

cobra health insurance clipboard hand pen

Other options to COBRA healthcare expenses

Many individuals are now electing to do their research regarding COBRA alternatives through the Foundation for Health Coverage Education. This is a non-profit organization that specializes in providing health coverage information to those who are uninsured. They have specifically driven home the point that COBRA is an option and prior to new government stimulus bill; it definitely wasn’t always your best option. Here are some other things to consider

If you haven’t signed up for COBRA healthcare coverage and you are in the process of losing your job, learn more about your rights under COBRA from the U.S. Department of Labor. Also, should you decide not to sign up for COBRA coverage, you have the option to enroll in a Marketplace plan as an alternative. You also have the right to a Special Enrollment Period should you lose your job-based medical coverage. This will allow you to have a 60 day period to enroll in a health plan. This will be in effect even if falls outside the annual Open Enrollment Period.

But suppose that you are already covered under COBRA and wish to switch to a Marketplace plan? Here are some options:

 
 

Your COBRA is running out

You’re ending COBRA early

If your COBRA costs change because your former employer stops contributing and now you must pay the full cost

During Open Enrollment

Yes, you may change.

Yes, you may change.

Yes, you may change.

Outside Open Enrollment

Yes, you may change — you qualify for a Special Enrollment Period.

No, you can’t change until the next Open Enrollment Period, your COBRA runs out, or you qualify for a Special Enrollment Period.

Yes, you may change — you qualify for a Special Enrollment Period.

 

In addition, you may wish to investigate government assistance for your COBRA expenses through the 2009 federal stimulus bill. The American Recovery and Reinvestment Act of 2009, nicknamed the Recovery Act, was a stimulus package enacted by the 111th U.S. Congress and signed into law by President Barack Obama in February 2009. This provision contains money for the federal government to pay 65 percent of COBRA premiums for up to nine months for people who qualify. Any changes/updates to this subsidy can be viewed at the Department of Labor Web site.

Other types of options that are available include “Slingshot Health.” With this particular option, no medical insurance is necessary and, you can use the app to bid on a price for a medical appointment. Basically, it works by typing in what medical care you need, how much you want to pay and your availability. At that point, one of their providers can accept your offer and see you as soon as one hour.

With the problems associated with employment and subsequent health care coverage, it pays to know what all your options are and to keep up with any on-going changes.

About Slingshot Health

Slingshot Health is a health tech startup that brings top healthcare providers and patients together. Patients bid on the cost of services and healthcare providers accept bids based on availability. Slingshot Health is unique in that it is a mutual marketplace putting both patients and providers back in control. Visit us at slingshothealth.com.