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. It's meant to bridge the gap until their new coverage becomes takes effect.

Important

As part of the American Rescue Plan, the government will cover 100% of COBRA premiums from April 1, 2021, to September 30, 2021. Those who chose to leave their job, or who gain access to coverage through their new job, will not be eligible.

How Do You Qualify for COBRA?

Three conditions must be met 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.

A qualifying event includes termination for any reason other than gross misconduct or reduced hours. For spouses and other dependents, there are a few other qualifying events. These include the 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. They then have 60 days to elect coverage. Each beneficiary can decide for themself whether they want to sign up for COBRA, or if they want to waive the option.

Anyone who waives COBRA can later revoke their waiver and sign up in the future. This is true 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 to Not Pay for COBRA

There are some factors you should keep in mind when thinking about whether or not to use COBRA. And one of these factors is 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 in the public health care marketplace, which is 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 admin 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 your policy had expired. Any records you keep can dispute the denial of coverage.