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10 things you should know about COBRA

A fear of losing your job is often compounded by a fear of losing your health insurance.

But there’s hope. You may be eligible for the continuation of your health insurance benefits through a federal law known as COBRA — short for the Consolidated Omnibus Budget Reconciliation Act.

health insuranceCOBRA provides a vital bridge between group health insurance plans for qualified workers, their spouses and their dependent children when their health insurance might otherwise be cut off. It's a safety net for families in the midst of crisis, such as unemployment, divorce or death of a spouse. Yet many people don't know how COBRA works or where to turn when they encounter problems with the program.

COBRA generally requires that group health plans sponsored by employers with 20 or more employees offer workers and their families the opportunity to temporarily extend their health insurance coverage. But the law grants an exemption to the District of Columbia, federal employees, certain church-related organizations and firms employing fewer than 20 people.

The American Recovery and Reinvestment Act of 2009 contains a provision that gives qualified COBRA participants a 65 percent federal subsidy to pay their COBRA premiums for up to fifteen months. You can take advantage of this assistance if you became eligible for COBRA from Sept. 1, 2008, to May 31, 2010. This applies to workers (and their spouses and dependents) who were involuntarily terminated (including those laid off) or had a reduction in work hours that led to loss of health insurance benefits. The law also gives you extra time to choose to elect COBRA, even if you've already declined it. For more details on premium assistance, know your COBRA rights.

There are many more things you should know about COBRA. Here are 10.

1. Certain "qualifying events" trigger 36 months of COBRA coverage for your dependents.

Voluntary or involuntary job loss (except in instances of gross misconduct) triggers 18 months of COBRA coverage for you and your dependents. However, your spouse and dependent children are entitled to 36 months of continued coverage under certain circumstances:

  • You become eligible for Medicare.
  • You get divorced or legally separated.
  • You die.

Additionally, your dependent child is eligible for 36 months of continued coverage under COBRA when he or she loses dependent-child status on your health insurance plan.

2. Your former employer can cancel your COBRA coverage if it drops group health insurance coverage completely or goes out of business.

When an employer goes out of business or drops its employee health insurance altogether, COBRA law does not apply because there is no health plan to "continue." If there are layoffs and the number of employees falls under 20, you are no longer eligible to receive COBRA.

3. If you move outside your COBRA health plan's coverage area, you effectively "lose" your COBRA benefits.

Let's say you lose your job in New York and decide to seek new employment in Texas. You can still enroll in COBRA, but it's not going to do you any good unless you intend to fly to New York every time you need medical treatment or a prescription. Many health insurance plans require that you use their local provider networks. Your employer is not required to offer you a plan in your new area.

4. You must pay all of your health insurance premiums under COBRA.

Cost is a major factor to consider when buying COBRA coverage. By law, you can be charged 100 percent of the plan's premiums, plus up to a 2 percent administrative fee.

Fortunately, 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 15 months. For more details on premium assistance, read know your COBRA rights.

5. COBRA can be used to protect your health insurance rights under the federal HIPAA law.

If you plan to skip COBRA — because it's expensive or you're hoping to find another job that offers group health insurance — think again. Consider what could happen if your job search drags on longer than you expect, you're diagnosed with a chronic or serious illness or if you're a woman who becomes pregnant. If you create a gap in your health insurance of more than 63 days, you'll lose your health insurance rights under the federal HIPAA law.

HIPAA (the Health Insurance Portability and Accountability Act) guarantees that people who have continuous health coverage — without a gap of more than 63 days — can't have their pre-existing conditions excluded when they join a new group health plan. So if you forgo COBRA and wind up with a three-month gap in coverage, you would lose your HIPAA protection when you later get new group health insurance. Here's more about HIPAA: Your rights to health insurance portability.

6. If you're eligible for Social Security disability benefits, you may receive 29 months of COBRA coverage.

If the United States Social Security Administration (SSA) determines that you are disabled, you may be entitled to up to 29 months of COBRA if:

You have experienced an 18-month qualifying event for COBRA (voluntary or involuntary job loss).

SSA determines you were disabled either before the COBRA event or within the first 60 days of COBRA continuation coverage.

Your health plan administrator has a copy of your SSA disability determination within 60 days after the determination is issued and before the end of the initial 18 months of COBRA.

7. Many states have their own "mini-COBRA" laws that grant broader rights in determining COBRA eligibility.

Even if you work at a small company that is exempt from federal law, you might not be out of luck when it comes to COBRA. Many states have their own "mini-COBRA" laws that give workers at firms who have between two and 19 employees the right to continue their group health plans.

While COBRA applies to self-funded plans and group health plans offered by employers with 20 or more employees, mini-COBRA laws do not apply to self-funded plans.

8. 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. You may also add new dependents if your employer offers this option to active employees. Newborns can be added at any time during the year as long as they are added within 30 days of birth.

9. Because COBRA is a federal law, the U.S. Department of Labor has jurisdiction over COBRA grievances.

Contact the U.S. Department of Labor, the agency that administers COBRA, if you believe your employer is in violation of COBRA law. The toll-free telephone number is (866) 444-EBSA (3272). Or see COBRA information on the Employee Benefits Security Administration Web site.

10. Even if you enroll in COBRA on the last day that you are eligible, your coverage is retroactive to the date you lost your employer-sponsored health plan.

COBRA beneficiaries have 60 days to decide whether they want COBRA coverage. If you enroll in COBRA before the 60 days are up, your coverage is then retroactive, as long as you pay the retroactive premiums. This means that if you incur medical bills during your "election period," you can retroactively — and legally — elect COBRA and have those bills covered.

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