COBRA coverage is a way to keep your former employer’s health insurance plan, but some issues can arise from this coverage, including the hefty price tag.

Are you concerned that you’ll lose your employer-based health insurance when you lose your job? You may be eligible for COBRA (Consolidated Omnibus Budget Reconciliation Act) insurance, which allows recently unemployed individuals and those who had their work hours cut to keep the same group health plan provided by the employer for a limited time.

However, COBRA health insurance coverage is expensive. Your former employer no longer foots its portion of the bill, leaving you to pay the entire health care bill. Additionally, several complications can arise when you opt for COBRA coverage.

Take the time to learn what is COBRA insurance, what you can expect with COBRA health insurance, the different problems you may face as a COBRA recipient, and how to resolve these issues.

Key Takeaways

  • COBRA is health insurance for unemployed people who recently lost their work-based group health plan coverage.
  • COBRA insurance lets you keep your coverage from group health plans, but it’s expensive and former employers don’t help pay the premiums.
  • Some problems can arise with COBRA, but there are ways to resolve those issues.
  • COBRA health insurance starts immediately after your coverage ends with the former employer and you can usually keep it for up to 18 months.
  • Losing your employer-sponsored health insurance is a qualifying event that also lets you sign up for a health insurance marketplace plan.

Here are seven COBRA problems and how to resolve them:

Problem #1: You never received your COBRA insurance enrollment packet

It’s not uncommon to fail to receive a COBRA enrollment packet after a job loss. Brad Cummins, owner/principal agent at Insurance Geek, points out that administrative errors may be responsible, as your employer may not realize your COBRA eligibility and that they’re obligated to provide coverage.

“This can occur when employers — often smaller companies without in-house human resources personnel — neglect to provide the required COBRA information notice,” says Brian Martucci, finance editor with Money Crashers. “If this happens to you, ask your HR point of contact to provide the enrollment packet.”

Alternatively, contact a COBRA administrator at the Department of Labor by phoning 866-444-3272, recommends Cummins.

Problem #2: You paid your COBRA coverage premiums, but the insurance company never received them

Here’s another possible snafu: Your COBRA premium is paid in full, but the insurance company claims they never got it.

In this case, you should immediately contact your previous employer and the Department of Labor (866-444-3272) if you realize that your payments were never received, says Cummins.

“This can be caused by banking errors, technical errors, and using the wrong information,” Cummins notes. “You are at risk of losing all your COBRA rights if your payments are not paid within the grace period, so do not delay.”

Also, keep a record of every payment you sent, such as a check copy or bank statement, and “provide them to the insurance company if necessary to prove that you are not at fault for nonpayment,” Martucci advises.

Problem #3: Your employer goes out of business or has canceled your health insurance plan

If your former employer goes under, you and other COBRA-eligible employees will remain covered only for as long as the employer’s health plan exists, according to Martucci. 

Once COBRA insurance coverage lapses because of the employer’s nonpayment of premiums, you no longer have health insurance.

However, losing your group coverage is a qualifying event that starts a special enrollment period on the health insurance marketplace through the Affordable Care Act. 

“This gives you 60 days to enroll in an Obamacare marketplace plan, even if it’s outside the normal open enrollment. Others may choose to explore increasingly popular concierge or direct-care services on the private health insurance market,” says Mark Waterstraat, chief customer officer at Alegeus. 

Problem #4: You enrolled in COBRA and paid your premiums, but your doctor says you don’t have coverage

As if COBRA wasn’t challenging enough with its high expense and complications, it’s also possible your doctor may deny treatment, claiming you don’t have coverage.

“This could be a network issue — that is, your chosen provider isn’t actually in your plan’s network — or due to an issue with the plan itself, like if you sought care for a service not covered by the plan,” Martucci adds. “On the other hand, this could arise because of some action or non-action taken by your employer, such as nonpayment of premiums or cancellation of the plan itself. Contact your plan administrator or insurer for more information.”

Problem #5: Your employer switched plans and you never got the new health plan information

Rest assured that if your employer abruptly switches health insurance plans, you’re still entitled to receive insurance coverage from them.

“Report your employer to the Department of Labor (866-444-3272) if the company you work for has more than 20 employees and you are eligible for COBRA coverage,” suggests Cummins.

This is often an issue caused by poor human resources processes at your former company.

“Contact your HR representative to obtain the new health plan information. Your employer is required by law to provide it, and you are automatically covered under the new plan,” Martucci adds.

Problem #6: Your COBRA premium increased substantially with no warning

Truth is, your insurer may raise COBRA premiums or your employer may change health plans after you leave, which could result in higher premiums.

“Unfortunately, this is a common occurrence in the world of group health coverage, and there are nothing COBRA recipients can do about it short of letting their coverage lapse and seeking a cheaper plan on the Obamacare marketplace or private health insurance market,” says Martucci.

Problem #7: You switch jobs and your new health insurance doesn’t start for 90 days — can you stay on COBRA continuation coverage?

Here, the good news is that you’re no longer unemployed. The bad news is that enrollment in your new company’s health care plan won’t be available to you for three or more months. What should you do?

“If you switch jobs, you can still stay on COBRA for up to 18 months as you wait for your new coverage to kick in,” says Cummins.

That can be expensive, of course, in which case you can always bridge the gap with short-term health insurance coverage or a marketplace plan, Martucci suggests.

Frequently Asked Questions

When should I receive COBRA information?

You should get your COBRA information no later than 44 days after losing your coverage, whether on the day your hours were reduced or thereafter. You should receive a written election notice from the group health plan explaining your right to elect COBRA continuation coverage. 

This notice should explain how long you and/or your family will have to decide whether or not to elect COBRA continuation coverage. 

The federal law demands that plan must give you at least 60 days from the date the notice is provided to you, or from the date your coverage ended, whichever is later, to elect continuation coverage.

Who is responsible for sending COBRA notices?

The administrator of your COBRA benefits plan is responsible for sending COBRA election paperwork to you. This can be a third party or your employer.

How long does it take to receive COBRA paperwork?

Typically, you should receive COBRA paperwork within 44 days of your last day at work. Employers are responsible for sending COBRA paperwork to their employees via the plan administrator, which may be the employer or a third party.

Does COBRA start immediately?

COBRA health insurance for a covered employee should begin immediately after your last day of work and coverage is continuous until COBRA expires, up to 18 months later. 

Eligible individuals, such as dependents, may qualify for COBRA coverage for up to 36 months, depending on the circumstances, including death, divorce or legal separation. 

Your first premium may not be due until days or weeks after your final day of employment, but premiums must be paid retroactively to avoid a lapse in health plan coverage.

Can an employer deny you COBRA?

Your employer can deny you COBRA benefits if you were terminated for gross misconduct.

“However, an employer can effectively deny COBRA coverage by canceling its group health insurance plan entirely,” says Martucci.

Can I get COBRA if I was fired?

If you were fired for gross misconduct, your employer can deny you COBRA coverage. 

“If you are fired for any other reason, you have the right to demand COBRA coverage,” says Cummins.

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