How to Use Cobra Insurance

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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.

As part of the American Rescue Plan, the federal government will cover 100% of COBRA premiums from April 1, 2021, to September 30, 2021. Those who left their job voluntarily or who gain access to new employer-based coverage will not be eligible.

Qualifications for COBRA Insurance

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 typically meet the standard if they have more than 20 full-time equivalent employees— churches, some church-affiliated organizations, and health insurance plans sponsored by the federal government are exempt.

Being a qualified beneficiary means you were covered by the employer-sponsored plan at the time coverage was lost. Qualified beneficiaries include spouses and other dependents on an employee's plan.

A qualifying event includes termination for any reason other than gross misconduct or a reduction in hours. For spouses and other dependents, qualifying events also can 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.

Electing COBRA Coverage

Employers must notify qualified beneficiaries about COBRA eligibility within 14 days of a qualifying event. Qualified beneficiaries then have 60 days to elect coverage. Each qualified beneficiary can decide independently to elect COBRA coverage or to waive. Anyone who waives COBRA coverage can revoke their waiver and elect COBRA coverage 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 deceased employees to use the insurance for 36 months. COBRA coverage must be equivalent to what was offered under the employer's plan.

Reasons to Not Pay for COBRA

Consider several factors before deciding whether or not to elect COBRA coverage, starting with the cost. COBRA requires employers to 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. Your cost can be up to 102% of the total cost of the premium, with the extra 2% labeled an administrative fee.

Cheaper options may be available in the public marketplace made available as part of the Affordable Care Act. You may qualify for a special enrollment period if you lost your job or encountered other life changes such as getting married or having a baby.

It's also possible you and your children may be eligible to be covered under your spouse or significant other's health policy.

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 notification you receive will give you instructions on where to send payment.

Be sure you continue to make insurance 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 example, if the insurance company covering you denies coverage by claiming your policy had expired, the records you keep can dispute the denial of coverage.

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