Whether you qualify for COBRA health insurance after termination of employment depends on whether or not you were fired for “gross misconduct.”
What is gross misconduct?
Unfortunately, the law that created COBRA doesn’t provide a definition. It’s open to interpretation. But in most cases, a covered employee, who gets fired, isn’t denied the right to continue health insurance coverage through COBRA.
Former employees are generally eligible if they had the employer’s health insurance plan and worked for a company with at least 20 employees and quit, got laid off or fired — and it wasn’t for gross misconduct.
You can also be eligible for COBRA if you:
- Lost health insurance because an employer cuts your hours
- Lost health coverage because of a divorce, a spouse’s death or another qualifying event
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. It was enacted in 1986 to give people and their families access to a temporary extension of coverage under an employer’s group health plan when that coverage might otherwise end. You and other covered members of your family are eligible for COBRA continuation coverage if your employment hours are reduced or you quit your job, are laid off or fired — except in cases of gross misconduct.
You also must have been covered under the employer’s group health insurance plan at the time you lost your job to be eligible for COBRA coverage. If, for instance, your company offers health benefits to certain groups of employees, and you weren’t among them, then you’re not eligible.
The federal law for COBRA applies only to companies with 20 or more employees, but some states have what are called “mini-Cobra” laws. Read about state-specific laws for COBRA if you were terminated from a company with fewer than 20 workers.
If you qualify, the law entitles you to 18 months of health benefits under your employer’s group health plan. The benefit of COBRA health insurance coverage is you get to keep your same health insurance, including benefits and provider network.
However, that comes with a drawback — much higher health insurance premiums. Employers don’t pay the COBRA costs. So, the former employee pays for the entire premium and health care costs plus an administrative fee. Usually, employers pay for more than half of premiums costs, but with COBRA, they don’t contribute anything. Instead, the former employee pays all of the COBRA premiums, which can be expensive.
Meanwhile, your spouse or dependent can continue receiving benefits from your employer’s plan, as long as they were covered when you were employed, even if you elect not to take advantage of COBRA insurance. Dependents can be eligible for COBRA for as long as 36 months depending on the circumstances.
You can decide to forego COBRA coverage. If so, check into individual health insurance through the Affordable Care Act marketplace or a short-term health insurance plan to bridge the gap.
Losing health insurance coverage also can create a special enrollment period to sign up for other coverage. Coverage loss is considered one of the qualifying events that sparks a special enrollment period. During that time, you can make sign up for another health plan, such as a marketplace plan or go on a spouse’s health plan if you’re eligible.
For more, read know your COBRA rights.