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7 common COBRA problems and what to do about them

COBRA — short for the Consolidated Omnibus Budget Reconciliation Act — provides a bridge between group health insurance plans for workers, their spouses and their dependent children when they lose their health insurance due to a job loss.

COBRA provides a safety net for families in the midst of crisis, such as unemployment, divorce, or death. Yet many people don't know how COBRA works or where to turn when they encounter problems with the program. It's important to know your COBRA rights. Below are seven common COBRA problems and who you should contact for help.

More on COBRA
Know your COBRA rights

State-specific laws for COBRA

10 things you should know about COBRA

1. You never received your COBRA enrollment packet.

 

Contact your former employer or your health plan administrator. Perhaps one or the other didn't have your current mailing address on record or there was some other paperwork-processing issue.

Your former employer must notify your health plan administrator within 30 days after your "qualifying event" — death, job termination, reduced hours of employment or eligibility for Medicare. Once notified, the plan administrator has 14 days to alert you and your family members — in person or by first-class mail — about your right to elect COBRA.

2. You paid your COBRA premiums but they were never received by the insurance company.

 

Contact the United States Department of Labor (DOL), the agency that administers COBRA. The toll-free telephone number is (866) 444-EBSA (3272), or see COBRA information on the Employee Benefits Security Administration Web site.

Although this is an issue between your former employer and the insurance company, the DOL is able to investigate and get to the root of the problem. Maybe the payment was lost in the mail or perhaps your former employer missed making the payment. Either way, you'll want make the DOL aware of any problems — otherwise the insurance company may drop your coverage and it is not required to notify you.

Keep in mind, individuals can bring civil action against employers to enforce COBRA rights or for failure to give proper notice to recipients. The court can award a penalty up to $110 per day for notice violations. The Department of Labor can also sue to enforce the statute. Additionally, the IRS can impose excise taxes in the event of certain violations. So, it's in your former company's best interest to comply with COBRA regulations to the letter.

3. The employer goes out of business or cancels your health insurance plan.

COBRA problems

Start looking for alternate health insurance. When your employer goes out of business or drops employee health insurance altogether, the group that formed the basis of your group health insurance plan disbands. When this happens, you are no longer eligible to continue your coverage under COBRA.

4. You enrolled in COBRA and paid your premiums but your doctor says you don't have coverage.

 

Contact your plan administrator. This scenario may occur when there is some paperwork-processing problem. Your COBRA status may not have made it into your insurer's computer system.

5. The employer switched plans and you never got the new health plan information.

 

Contact your plan administrator.

It's the health plan administrator's responsibility to inform you when your former employer switches plans. Also, under COBRA you have the same health insurance rights during "open enrollment" as your former employer's active employees.

If your former employer offers an open enrollment period to active employees and you're on COBRA, you (and your COBRA-enrolled spouse and dependent children) also have the right to switch health insurance plans at that time.

6. Your COBRA premium increased substantially with no warning.

 

Open up your wallet. If the premiums rise for the plan's active employees, so too will your COBRA premiums. COBRA law provides no cost-containment measures for premiums, although you can't be billed for more than 102 percent of the premiums.

The American Recovery and Reinvestment Act of 2009 now provides qualified COBRA participants with a 65 percent federal subsidy to pay their COBRA premiums for up to nine months. For more details on premium assistance, read know your COBRA rights.

7. You switch jobs and your new health insurance doesn't start for 90 days. Can you remain on COBRA?

 

Yes, you may remain on COBRA.

Think twice if you're tempted to go without because you're betting you will not have a serious illness or injury before your new health insurance kicks in. A medical crisis could easily bankrupt you.

You can also use COBRA to protect your health insurance rights under the federal HIPAA law. The Health Insurance Portability and Accountability Act (HIPAA) guarantees that people who have continuous group health coverage — without a gap of more than 63 days — can't be forced to sit out a pre-existing condition waiting period under their new group health insurance plan, even if they have a serious pre-existing condition such as diabetes.

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