How to Sign Up and Use Your COBRA Insurance

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If you've lost your job or left for a new position, there may be a time when you don’t have health insurance.

Consolidated Omnibus Budget Reconciliation Act (COBRA) insurance coverage was designed to provide people with a way to keep their existing health insurance for a period of time, until their new coverage takes effect.

Important

As part of the American Rescue Plan, the government covered 100% of COBRA premiums from April 1, 2021 to Sept. 30, 2021. Those who chose to leave their job, or who gained access to coverage through their new job, were not eligible.

How Do You Qualify for COBRA?

To be covered by COBRA:

  1. Your employer must meet the standards to be required to offer the option.
  2. You must have been a qualified beneficiary under your employer's plan.
  3. The reason you lost coverage must be a qualifying event.

Employers often meet the standard if they have more than 20 full-time employees. Churches and some other organizations, as well as health plans sponsored by the federal government, are exempt.

Being a qualified beneficiary means you were covered by the employer-sponsored plan at the time you lost coverage. Your spouse and other dependents may also be eligible.

Potential qualifying events include termination for any reason other than gross misconduct or reduced hours. For spouses and other dependents, there are a few other qualifying events, such as divorce or separation from the covered employee; the death of the covered employee; the covered employee becoming eligible for Medicare; or loss of dependent-child status.

How to Sign Up for COBRA Coverage

Employers must inform those who are qualified about COBRA eligibility within 14 days of a qualifying event. Then there are 60 days to elect coverage. Beneficiaries can decide for themselves whether they want to sign up for COBRA or waive the option. Anyone who waives COBRA can later revoke their waiver and sign up in the future, as long as they do so within the election period.

You can use COBRA for up to 18 months. COBRA allows for the families of employees who have died to use the insurance for 36 months. COBRA coverage must be equal to what was offered under the employer's plan.

Reasons Not to Pay for COBRA

There are some factors you should keep in mind when thinking about whether or not to use COBRA, such as the cost. COBRA requires employers to keep you on their insurance for as long as you need it, or for the maximum time frame, but COBRA does not mandate that they pay for it.

Your cost could be up to 102% of the total cost of the premium. The extra 2% may be an "administrative" fee.

Tip

You might be able to find cheaper options on the public healthcare exchanges, which are part of the Affordable Care Act (ACA). You may qualify for a special enrollment period if you lost your job or had a life change, such as getting married or having a baby.

You and your children also may be eligible to be covered under your spouse or partner's health policy.

How to Pay Your COBRA Insurance Premium

You may pay your COBRA premium directly to the employer's insurance company, or you may pay it to a COBRA admininstration company. When you sign up, you will get clear instructions on where to send payment.

Be sure you keep making payments as long as you need the insurance. If you stop paying, your coverage can be canceled.

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. For instance, the insurance company covering you might try to deny coverage by claiming that your policy had expired. Any records you keep can help you dispute the denial of coverage.

Frequently Asked Questions (FAQs)

How long do you have to sign up for COBRA?

After you receive notice of termination, diminished hours, or that your coverage is subject to change, you have 60 days to elect COBRA coverage. You must have already been enrolled under your employer's health insurance plan, and a qualifying event must have already occurred for you to be eligible for coverage.

Can I sign up for Medicare Part B when I am on COBRA?

You can sign up for Medicare Part B if you are on COBRA insurance. Your COBRA coverage will likely end once you sign up, however. You have eight months to sign up for Part B coverage without a penalty, regardless of whether you sign up for COBRA or not. If you miss that period, you will need to wait for open enrollment.

How long can I stay on COBRA?

The length of time that you can have COBRA coverage depends on the type of qualifying event and can span from 18 to 36 months, depending on the cause and whether you become eligible for other types of coverage options like Medicare Part B.

Is COBRA cheaper than individual insurance?

When faced with losing health insurance coverage or a job, COBRA is a great coverage option that people can rely on. However, other options can be cheaper or can provide you with more or less coverage, depending on your needs. Find the right option available to you, and act quickly before enrollment periods end.