COBRA and New Jersey Continuation are both laws that allow you to continue your health insurance benefits when they would have otherwise ended. While the laws both achieve this common goal, they are different in many ways, and apply in different circumstances.
COBRA is a Federal law that applies to companies that employ more than 20 people. It is a law, not an insurance company, as so many mistake it to be. Under the COBRA law you can continue your benefits if they would have ended due to the following reasons: You quit your job or were terminated (other than for gross misconduct), you had coverage through your husband’s (or wife’s) employer and are getting divorced, you are a college student who recently graduated and are over age to be a dependent on the plan, or coverage was through your spouse’s employer, and your spouse passed away. The time limits for how long you can continue benefits vary depending on what circumstance caused you to need to continue benefits under COBRA. The best way to obtain information about this is to call the human relations department of the employer who the coverage is through, and do so promptly! If you leave your job, the responsibility is the employers’ to notify you of your right to continue benefits, but in life events such as death, divorce, or college graduation, the responsibility falls on your shoulders.
NEW JERSEY CONTINUATION, on the other hand, is a New Jersey law applying to companies with less than 20 employees. It is “employee driven” which means that the ability to continue benefits must be due to an event occurring in the employee’s life, not the dependents. For example, if the employee’s job is terminated, the employee and any insured dependents can continue coverage for a period of 12 months. If your not-so-independent-yet child aged out on your plan, that child does not have the ability to continue benefits under NJ Continuation.
Under both laws the employee is responsible for 100% of the premium, and the employer has the right to charge a 2% administrative fee for keeping you on the plan when you are no longer an active employee. Very often, paying 102% of a group premium is less expensive than paying 100% of the premium for the products available on the individual market right now, not to mention the difference in benefits. In most cases, premiums will be paid to the employer, not to the insurance company directly. Some large companies outsource the responsibility of managing COBRA, and have a third party company handle the billing and collecting of premiums for the people on COBRA. If you are considering continuing your benefits under COBRA or NJ Continuation, you may wish to compare the benefits and premium to what you could purchase on your own. Health insurance is not inexpensive, and you certainly want to know that you are putting your premium dollars where you can get the most coverage for the least amount of money.
Examples and Applications:
A gentleman called our office this past week. He is seeking a divorce, but was most concerned about the health insurance situation for his wife if he did so, as she has some medical conditions. He did not want to leave her without insurance, or subject her to a waiting period for pre-existing conditions if they divorced. Luckily, he works for a company with over a hundred employees, and the COBRA law applies to his situation. If this couple pursues a divorce, the wife can continue her benefits for a period of 36 months. During that three-year period, she may either find a job that offers benefits herself, marry someone who has coverage, or at the end of the three years, will have to purchase an individual plan. As long as she has continual coverage she will be able to change plans without a waiting period for any of her per-existing conditions.
“Tim” recently graduated from college and wants to continue the benefits he had under his Dad’s health insurance through the father’s employer. Unfortunately, his Dad works for a company with fewer than 20 employees, and therefore the COBRA law does not pertain to him. NJ Continuation is “employee driven” and, as Tim was the dependent and not the employee, he cannot continue his benefits on this plan and should purchase a plan on his own.
Irene Card & Betsy Chandler share the responsibilities of running Medical Insurance
Claims, Inc. a health insurance services company. If you have questions relative to this
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