In two weeks, I am leaving my job and leaping into the world of entrepreneurship! There are many things about this career move that have caused me anxiety, but my biggest worry has been health and dental insurance for my family. Because my husband is self-employed, we have always had coverage through my employer. We now have two options: purchase COBRA insurance through my current employer or purchase health and dental insurance on our own. The most affordable option is likely the health care exchange created by the Affordable Care Act (ACA, also known as “Obamacare”). As many of you know, the current administration is actively making changes to the health care bill and many of the existing benefits may be eliminated. How ironic is it that I, a physician, am now struggling to ensure my family has adequate health insurance coverage? Well, I wouldn’t be Your GPS Doc if I didn’t use my situation to help you navigate the health care system. So, in the next couple of posts I will take you on my journey and I will share the lessons I’ve learned along the way. Let’s start with COBRA and the ten things you need to know.
1. What is COBRA?
COBRA is the “Consolidated Omnibus Budget Reconciliation Act”. It was passed in 1985 and requires employers to offer employees, their spouses, former spouses, and dependent children the opportunity to temporarily continue coverage under the employer’s group health insurance plan after a “qualifying event”.
2. What is a “qualifying event”?
Qualifying events are situations that would normally lead to termination of group health insurance provided by an employer. They include the following:
- Termination of employment for any reason except gross misconduct (includes layoffs, involuntary termination, and willful termination/resignation of the employee)
- Reduction in hours (such that the employee no longer qualifies for health benefits)
- Death of the employee
- Legal separation or divorce
- Covered employee becomes eligible for Medicare
- Dependent child no longer qualifies as a dependent under the rules of the plan
3. Which health insurance plans must abide by COBRA rules and regulations?
All group health insurance plans by employers in the private sector with at least 20 employees are subject to COBRA. (Federal government employees are offered continuation of health insurance coverage through a different law.)
4. Who is eligible for COBRA?
To be eligible, you must have been enrolled in the group health insurance plan at the time of the qualifying event and the insurance plan must still be offered to active employees. Eligible employees, their spouses, and dependent children are called “qualified beneficiaries”.
5. How are COBRA benefits activated?
The employer must notify the insurance plan within 30 days of an employee’s termination or reduction in hours. The employee is responsible for notifying the plan for all other qualifying events. Within 14 days of receiving such notice, the insurance plan must send the employee and all other qualified beneficiaries a notice that explains their rights to continue coverage, the coverage options, the cost associated with each, rules and deadlines, and how to sign up for coverage.
6. How long do I have to sign up for COBRA?
The employee and beneficiaries have 60 days after the qualifying event to elect COBRA coverage. Note that individuals are usually restricted to purchasing/changing health insurance coverage during the “open enrollment period”. Qualifying events activate a “special enrollment period” that expires after 60 days.
7. Does COBRA cost more?
Yes! Because group health plans are subsidized by the employer, the employee’s monthly premium represents only a portion of the actual monthly cost of the insurance plan. As a result, coverage under COBRA will be significantly more expensive, as the employee is now responsible for the total cost. By law, you cannot be charged more than 102% of the actual (not subsidized) cost of the plan for covered individuals deemed similar to you.
8. How long will my coverage last under COBRA?
For termination of employment or reduction in hours, coverage lasts for a maximum of 18 months. For all other qualifying events, coverage must be offered for up to 36 months. If a qualified beneficiary becomes disabled or if a second qualifying event occurs prior to expiration of coverage, COBRA coverage can be extended.
9. What health insurance options do I have other than COBRA?
If you no longer have health insurance coverage under your employer due to a qualifying event, there are several alternatives to COBRA. One option is to get coverage through your spouse’s employer. Dependents may be eligible for coverage through the other parent’s employer. These options must be exercised within 30 days of the qualifying event. Another option is to purchase coverage in the “Health Insurance Marketplace”, also known as the “Health Insurance Exchange”. The marketplace was created by the Affordable Care Act and provides a wealth of private insurance options for individuals without health insurance coverage. Depending on your income, you may qualify for tax credits that are typically provided in the form of reduced premiums. Visit www.healthcare.gov for more information. You can also purchase health insurance independently, either by directly contacting the insurance companies or through a health insurance broker. You must sign up for your new health insurance plan within 60 days of losing employer-based health insurance. *Note- Individuals who elect continuation of coverage through COBRA cannot enroll in another insurance plan (including the marketplace) until one of the following occurs: coverage under a new employer, another qualifying event, or open enrollment season.
10. When do I have to start paying for COBRA?
The first payment is due within 45 days of electing coverage. If you fail to make a payment within that time period, or if you are late for future payments (beyond the 30-day grace period), your coverage can be terminated.
In summary, COBRA is a law that protects individuals who have lost insurance through their employer by allowing them to continue coverage for themselves and their family members for a limited amount of time. HOWEVER, it is extremely expensive, so you should be sure to explore all of your options.
After talking with my Human Resources Department, I learned that it will cost THREE TIMES more than we’re currently paying to continue my family’s health insurance benefits through COBRA! Despite the sticker shock, my husband and I were considering purchasing COBRA coverage for a month or two while we took more time to figure out the Health Insurance Exchange. However, after doing my research I now know this is not a viable option, as we will not be allowed to switch from COBRA to the marketplace until open enrollment season in November 2017. (See question #9 for more information.) We will have to explore our other options. Stay tuned for the next article for tips and information based on the next phase of my journey to purchasing health insurance. Wish me luck!
This information is meant to provide a general overview of COBRA coverage. Please consult your health plan documents for details specific to your situation.
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