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COBRA is a law, it is not an insurance company and it is not an insurance policy. COBRA is a very complex law that allows you to continue your health insurance benefits under certain conditions. If you or your spouse are employed by a company with more than 20 employees, the COBRA law allows you to continue your health insurance benefits if your employment terminates. The only exceptions are the Federal Government (they have there own rules regarding continuation coverage) and church plans. It does not matter whether you choose to take an early retirement or change jobs or if your employer is down sizing. You are referred to as a Qualified Beneficiary if you were covered under your employers’ group health plan the day before a COBRA qualifying event takes place. A qualified beneficiary is the covered employee, covered spouse of the employee, covered dependent child of the employee, or any child born to, or placed for adoption with the covered employee during the period of continuation coverage. In the preceding paragraph, I mentioned a COBRA qualifying event. A Qualifying Event is something that happens that will allow you to continue your health insurance benefits. An event can be voluntary termination which means you chose to leave your place of employment, involuntary termination (with the exception of gross misconduct) meaning your employer chooses to terminate your employment, or a reduction of hours, lay off, leave of absence or full time employment down graded to part time. A qualifying event will provide all qualified beneficiaries with health insurance for 18 months from the date of the qualifying event (the last day you worked). There are times when the 18 month time frame can be extended due to disability. There are certain times when the health insurance benefits can be continued for 36 months, such as the death of the employee, divorce or legal separation, or dependent child ceasing to be a dependent. Note that in these cases, it is only the spouse and dependent children that can continue benefits for 36 months. It is the responsibility of the employee to notify the employer or health plan administrator of a divorce or legal separation, or when a dependent child will cease to be a dependent. There are certain instances when an employee becomes eligible for Medicare that they may continue their health insurance benefits for 36 months. However, those instances are so rare and the law is so complex that for the sake of disseminating general information about COBRA, I would like the readers of this column to understand that 99% of the time they are not eligible for COBRA once they become eligible for Medicare. It is not my intent to go into the exceptions of the COBRA law in this column. How does one go about collecting benefits under the COBRA law? The employer must notify all qualified beneficiaries within 44 days of the qualifying event. This notification should be done by certified mail, return receipt requested. The employee or other qualified beneficiary then has 60 days to decide whether or not they wish to c ontinue the coverage. The qualified beneficiary is responsible for paying the entire premium plus 2% for administration costs. The premium is paid by the employee from the date of termination of employment. Keep in mind that election of COBRA benefits is temporary. The benefits will run out after 18 or 36 months. The purpose of this law is to ensure that individuals do not lose their health insurance when it is tied to their employment. It is hoped that this will alleviate some of the pressure in trying to find other options for health insurance. In many cases, the COBRA premium may simply be too expensive and the employee may find it more cost effective to purchase an individual health insurance policy. This very often depends upon the state in which the employee resides. Thanks to the Health Insurance Portability and Accountability Act, (HIPAA) there should be no waiting period for preexisting conditions for anyone so long as they can prove that they have been continuously insured for at least 12 month (in some cases 18 months). If you are in the position to choose continuation of coverage under the COBRA law, even though you have 60 days in which to notify your employer of your wishes, the sooner you do it the better. No claim will be processed during this period of “Suspension”. Once the premium is paid back to the date of termination you will be reinstated in the group plan and claims will then be processed. This column is intended to give you a general overview of the COBRA law and it is not to be construed as a comprehensive explanation. I attended an 8 hour seminar on the COBRA law and it could easily have gone on for another 32 hours, that is how complex the law is. |
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