How to Use Cobra Insurance

Doctor's office check up.
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If you've lost your job or left your employer for a new position, you may have a period when you don’t have health insurance coverage. Consolidated Omnibus Budget Reconciliation Act (COBRA) insurance coverage was designed and enacted to provide people with a continuation of their existing health insurance to bridge the gap until their new, permanent coverage becomes effective.

The Qualifications for COBRA Insurance

If you experience a lapse in coverage, due to a qualifying event, you are possibly covered by COBRA. Your employer must meet the requirements to provide the benefit, however. An employer with 20 or more employees is required by COBRA (the Public Health Services Act) to provide a temporary continuation of group health coverage in certain circumstances.

Your circumstances will dictate if you are eligible for COBRA coverage. According to the Centers for Medicare and Medicaid Services, you must be meet these requirements:

Be "a 'covered employee' (a term that includes active employees, terminated employees and retirees); a covered employee's spouse and dependent children; any child born to or placed for adoption with a covered employee during the period of COBRA coverage; agents; self-employed individuals; independent contractors and their employees; directors of the employer; and, for public sector group health plans, political appointees and elected officials."

There are many qualifying events that begin COBRA coverage. If the covered employee dies the family may be covered. If you are fired or have your hours reduced you may qualify. If you become divorced or legally separated from a covered employee you might be covered, or if you become entitled to Medicare you could be covered.

You can use COBRA for up to eighteen months. COBRA allows for the families of deceased employees to use the insurance for 36 months.

You are allowed 60 days to decide to make your initial COBRA insurance payment when your insurance coverage ends. Once you elect coverage, you have 45 days to submit your first payment.

Reasons to Not Pay for COBRA

There are some other considerations to be made beforehand. Carefully consider all of your options before you make the decision:

  • COBRA requires that an employer keep you on their insurance for as long as you need it, or for the maximum time frame. However, the act does not require them to pay for it.
  • COBRA is expensive. Premiums are significantly more than you were paying before—the total of your premium, the premium your employer paid, plus a 2% administrative fee.
  • Cheaper continuous health care plans are probably available in the public marketplace.
  • If you know far enough in advance, you may be able to set up a high deductible policy to cover the period of time between insurances.
  • You and your children may be covered under your spouse or significant other's health policy.
  • You may be able to find short term insurance or high deductible insurance for lower premiums.
  • Losing coverage because of a job loss makes you eligible to enroll in the marketplaces when open enrollment is closed.

Paying for Your COBRA Insurance Premium

You may pay your COBRA insurance directly to the employer's insurance company, or you may pay it to a COBRA administrative company. The letter you receive will give you instructions on where to send payment.

Be sure that you continue to make insurance payments as long as you need the insurance. You are able to cancel your COBRA coverage any anytime via written notice or buy stopping payments, but you should wait until your new coverage is in effect.

Keep All Documents For Your Records

If you opt-out of the COBRA option, you will receive a letter from the employer's insurance company stating the dates that you were covered.

You should keep all records of coverage in case you need them to prove you were covered during a period of time.

Health Insurance Protects You and Your Family

Employers' health plans are not always the best plans available for their employees. You can take advantage of the different types of insurance that the Affordable Care Act offers. Take the opportunity to find health insurance and choose a policy that is right for you and your family.

The fines from the federal government for not having health insurance are no longer in effect. If you do not have health insurance, you can face fines and penalties if enforced in your state, so be sure to check your state laws if you elect to not be covered for a period of time.

The rules around health insurance change continuously. Regardless of the existing laws, it is important to have health insurance. It protects you from the large medical bills in case of health issues, and keeps your family healthy and prepared for the future.