A Guide to COBRA Benefits & Coverage

People who have recently been laid off or had their hours reduced due to the coronavirus outbreak may be worried about losing their employer-sponsored health insurance at a time when it may be dangerous to go without health care. Fortunately, most employees in the U.S. qualify to continue their existing health insurance under an option called COBRA.

However, some consumers have reported not being notified of their rights under this act, either by receiving an incomplete notice or never receiving a notice at all. According to the law, employees who qualify for COBRA benefits must be notified of their rights within 44 days of having their hours reduced or being laid off. The employee will have 60 days to decide whether to choose health insurance coverage through the program.

Those who did not receive complete COBRA information when separated from a job (or did not receive it at all) should be aware of their COBRA benefits. A number of employers, including Marriot and Best Buy, have faced lawsuits from plaintiffs claiming they were not provided with proper notices when their employment came to an end.

What is the COBRA Act?

COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act. This program allows eligible workers to keep their employer-provided medical insurance in the event they are terminated, laid off, downsized or have their hours cut.

Under federal law, companies with a minimum of 50 full-time workers must provide health insurance to those who qualify by paying part of their insurance premiums. Once that worker’s employment ends or their schedule falls below a certain number of hours per week, the company is no longer obligated to pay its share of the premium.

Under the COBRA Act, the worker and his or her covered family members can continue coverage by paying the employer’s share, plus two percent. While this can be more expensive for the worker, it is usually less than an individual policy.

COBRA Healthcare Benefits

COBRA is actually a medical insurance program and thus may cover prescription costs, dental and vision care. In general, as long as the former employee qualifies, COBRA health insurance must be identical to that offered to current employees. Additionally, workers who qualify must be allowed the same choices as those who are still under their employers’ policies.

Coverage Duration

The period under which a former worker is able to receive COBRA benefits is usually 18 months, although this can be extended to three full years in certain cases, such as:

• a family member is disabled
• the death of the covered employee
• separation or divorce
• a dependent child turns 18

Early Termination Clause

COBRA healthcare benefits may be terminated early if:

• the beneficiary fails to pay premiums in a timely manner
• the employer leaves a group health plan
• the beneficiary becomes eligible for another group plan or Medicare
• the beneficiary engages in fraud or other misconduct

Is COBRA Worth It?

As with most things, COBRA has its pros and cons. On one hand, beneficiaries continue to have access to the same health care provider(s) and network. COBRA also continues coverage for pre-existing conditions and regular prescription medications. This may be important for people who need to continue seeing the same doctors, or know they will need healthcare during the period of time they are without a job.

On the other hand, a COBRA policy can be costly, since the employer is no longer paying a percentage, placing the entire burden on the insured. Many employers pay up to around 80 percent of the costs of a health care plan.

Under COBRA, these costs are all the responsibility of the insured party, meaning that their health insurance cost may rise substantially. According to the Kaiser Family Foundation, the average cost of employer-sponsored health plans in 2019 was more than $7,000 for an individual and around $20,000 for a family. As employees generally pay a contribution of around $1,000 for individual coverage and $6,000 for family coverage, this may be a shocking increase in cost.

There is also a limited time period, as well as the danger that an employer will decide to discontinue the coverage. Furthermore, if there are any changes in the plan – such as the services offered or a change in deductibles – the beneficiary will have no choice but to accept them.

The good news is that the added costs of a COBRA policy are tax deductible; currently, taxpayers can write up COBRA premiums and other health care costs that exceed 7.5 percent of the income listed on Schedule A.

Join a Free COBRA Class Action Lawsuit Investigation

If you received a COBRA notice that did not fully disclose your rights and how to retain your health insurance following separation from your job, or you received no notice at all, you may be qualify to join this COBRA notice class action lawsuit investigation.

Get a Free Case Evaluation

This article is not legal advice. It is presented
for informational purposes only.