Joanna Szabo  |  July 22, 2020

Category: Consumer Guides

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confused african american man dealing with insurance paperwork

You may have heard of COBRA—short for the Consolidated Omnibus Budget Reconciliation Act—especially if you’ve lost your job or had your work hours reduced. If laid off, you probably received a COBRA notice. But what exactly is COBRA coverage, and what does COBRA eligibility look like?

Is COBRA the best choice for you and your family?

What Is COBRA Coverage?

COBRA coverage, or COBRA continuation coverage, is a type of insurance a worker can opt into after losing eligibility for group health insurance benefits from an employer. Most often, this is because of getting laid off, but the COBRA option can also be triggered by the worker’s hours reduced below the required threshold.

COBRA coverage is a form of health insurance coverage that offers a temporary continuation of those group benefits that a worker otherwise would have lost. COBRA is a collection of health benefit provisions that amend the Employment Retirement Income Security Act (ERISA), the Internal Revenue Code (IRC), and the Public Health Service Act. Under the law, COBRA continuation coverage lasts for only a limited period, between 18 and 36 months, though a particular plan may offer longer periods of coverage.

COBRA benefits can not only apply to the worker themselves, but are also offered for their spouses, former spouses, and dependent children.

Typically, receiving coverage through COBRA is more expensive than those same benefits were under the employer’s group health plan, because the employer is no longer required to pay part of the cost of the coverage, and the worker is left to pay the full amount on their own.

Determining COBRA Eligibility

In general, the group health plans maintained by employers in the private sector with 20 or more employees are subject to COBRA, along with the group health plans through state or local governments. Plans that are sponsored by the Federal government or by churches or church organizations are not included in COBRA law.

In some cases, certain states have laws similar to COBRA—that is, intended to protect employees from losing health coverage when they lose their job or have their hours reduced. These state laws may apply to companies with fewer than 20 employees, and are sometimes referred to as “mini-COBRA.”

Just because you fall under COBRA eligibility doesn’t mean you have to take it. Instead, it’s meant as a choice you can opt into. Other options are likely available for you, such as a spouse’s plan or Medicaid. Losing your job also makes you eligible for special enrollment in the Health Insurance Marketplace, though you must select a plan by the 60-day mark after losing your job. These options may be significantly less expensive for you, and may even be more generous in the benefits they provide.

If there is a gap between your coverage, getting COBRA coverage for the period between losing your job and starting coverage through the Marketplace may be an option.

insurance eligibilityComponents of Eligibility

The three main components of eligibility for COBRA continued coverage are that your group health plan must be covered by COBRA, a qualifying event must occur, and you must be a qualified beneficiary.

Your group health plan must be covered by COBRA. COBRA typically covers group plans maintained by companies in the private sector or by state and local governments with 20 or more employees. Full- and part-time employees both count toward this number; those part-time employees are counted as a fraction of a full-time employee.

A qualifying event must occur. A qualifying event is whatever triggers an employee to lose their group health coverage and makes them eligible for COBRA health insurance benefits. For employees, such events include:

  • termination (except in the case of gross misconduct)
  • reduction in the number of hours worked

For spouses and dependents of covered employees, these same qualifying events will trigger COBRA as an option, along with these additional qualifying events:

  • The covered employee becomes entitled to Medicare
  • Divorce or legal separation of the spouse from the covered employee
  • Death of the covered employee

Under the Affordable Care Act, plans that offer coverage to dependent children must continue offering that coverage until the adult child turns 26 years old.

You are a qualified beneficiary. In short, a qualified beneficiary of COBRA coverage is a covered employee, the employee’s spouse or former spouse, or the employee’s dependent child. In some cases after a company goes bankrupt, a retired employee, their spouse, and dependent may also be considered qualified beneficiaries.

Who Pays For COBRA Coverage?

COBRA continuation coverage is often substantially more expensive than that same coverage when maintained by the employer, though it cannot cost more than 102 percent of the cost of the plan for an employee still covered by the company. The plan can include both what the employee used to play plus the cost to the employer, as well as an additional 2 percent for administrative costs.

The election notice informing you of your option to opt into COBRA continuation coverage should include all the necessary information regarding what COBRA is, what premiums you can expect, due dates for those premiums, and any consequences for either late payment or nonpayment of premiums.

Some employers may choose to either subsidize or pay the cost of their employees’ health coverage, and in some cases, this can include COBRA coverage as part of a severance agreement with employees.

COBRA Coverage During COVID-19

In the last several months, the United States has seen a huge surge in unemployment due to the ongoing COVID-19 pandemic. Unemployment numbers have hit peaks this summer higher than the worst peaks during the Great Recession, which peaked at 10.0% in October 2009.

As millions across the country have lost their jobs, permanently or temporarily, and losing health insurance, more and more may be interested in their own COBRA eligibility, trying to determine if COBRA is the right option for them.

When a person is terminated from their job, COBRA insurance allows them to stay on their ex-employers health plan, though there are often higher premiums involved for this. During the COVID-19 pandemic, the deadline for deciding whether or not to enroll in COBRA has been extended.

Typically, workers who have lost their jobs have 60 days to decide whether to enroll in COBRA, and then 45 days on top of that before they must pay their first premium. However, in light of the ongoing pandemic, the U.S. Labor Department (DOL) and the Internal Revenue Service (IRS) have offered joint guidance allowing newly unemployed Americans up to 60 days after the end of the official coronavirus national emergency designation to decide whether or not they are going to enroll in COBRA.

As it currently stands, the national emergency for coronavirus ends on June 29, so the new COBRA enrollment deadline is Aug. 28. However, the administration may choose to extend the national emergency, which would in turn extend this deadline.

Filing A COBRA Eligibility Application

The COBRA notice you receive from your employer should inform you how to submit a claim for COBRA benefits. Make sure to follow these rules and adhere to the deadlines, as consequences for missing deadlines can mean temporary cancellation of coverage or even complete loss of COBRA rights.

Employers are legally required to notify employees of their COBRA eligibility when they leave, as well as provide certain information about this plan.

Several companies have been hit with class action lawsuits by former employees who allege that they were not given proper notice of the healthcare benefits they would receive under COBRA after they left the company. Filing a lawsuit can be a daunting prospect, so Top Class Actions has laid the groundwork for you by connecting you with an experienced attorney. Consulting an attorney can help you determine if you have a claim, navigate the complexities of litigation, and maximize your potential compensation.

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.

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