Sign up for COBRA Insurance

COBRA, which stands for Consolidated Omnibus Budget Reconciliation Act, was signed into law in 1986 by President Reagan to ensure that employees and their families can maintain health insurance after job loss or other qualifying event.[1] Applying should not be difficult, though it is important to verify that COBRA is the best option for you.

Steps

Establishing Eligibility

  1. Verify that you had the correct type of plan. Unlike Medicare and Medicaid, COBRA is not a federal insurance program. Instead it is a federal law that allows you to keep any private insurance that you might have had after a sudden loss of coverage.You must have been part of a group plan offered by your employer to qualify for COBRA. [2]
    • The vast majority of employer provided healthcare qualifies. However, individual insurance, including insurance purchased through the federal health exchanges, does not qualify for COBRA coverage.
    • There is an exception for small health plans. There must be at least 20 covered employees for your plan to qualify for COBRA coverage.
    • When in doubt, contact your insurance company and ask if you qualify for COBRA coverage or review the Summary Plan Description, which should have been provided to you when you signed up for the plan.
  2. Verify that you had an appropriate qualifying event. An event is what has caused you to lose your insurance coverage. A qualifying event may include the death of the employee, their termination, or a reduction in their hours. Notably, it is not a qualifying event if the employee lost their job due to gross incompetence.[2]
    • The termination of employment is a qualifying event regardless of whether it is voluntary. That means that if you retire or resign, you are still eligible for COBRA.[3]
    • Misconduct is not defined by the law and is thus subject to the interpretation of a court of law, should your employer decide to challenge your application for COBRA coverage. At a minimum it requires proof of willful wrongdoing directly associated with your employment. It is typically not in your employer's interest to charge misconduct and thus should probably not be an issue.[3]
  3. Establish that you are a qualifying beneficiary. A qualifying beneficiary is any family member who was on the employer provided healthcare before the qualifying event. Beneficiaries can apply for coverage separately. For example, if a parent goes on Medicare, they no longer require – and would not be eligible – for COBRA. The child, however, can apply for COBRA independently of their parent.
    • If you are the beneficiary of someone else’s plan and they lose their coverage, you can apply for COBRA. This includes instances where the employee died or went on to Medicare. This is also applies in cases where your relationship to the plan holder has changed, whether because you have divorced them or because you have aged out of being a dependent child.
  4. Consider other options first. COBRA will only allow you to stay on your employer’s plan for a limited period of time and you will be expected to cover the costs your employer would otherwise pay. This might be more expensive than getting insurance through the exchange. The exchange marketplace opened in 2013 with the Affordable Care Act. You can keep that insurance permanently and it is subject to fewer restrictions. Normally you can only apply for insurance on the exchange during certain times of the year, but you are also given a 60 day grace period after the termination of your insurance in which you can apply. You should visit the site to determine what the rates might be in your situation.
    • Depending on your employers plan and the plans you qualify for on the exchange, it may make more sense to sign up on https://www.healthcare.gov.
    • If you do not qualify for federal COBRA insurance you can also contact your state insurance commissioner to see if you qualify for a state program. Often these do not require that your group plan include at least 20 employees, making it easier to apply.
    • When you visit the exchange you will also be informed if you meet the requirements for Medicare or CHIP insurance, which are cheap, subsidized alternatives.

Applying for COBRA

  1. Give notice of qualifying event. Because COBRA operates through your existing plan, much of it is subject to variation from one insurance company to another. The Summary Plan Description, which should have been given to you when you received your current insurance plan, will include information about COBRA coverage and how to provide notice of qualifying event. If you are having trouble locating this, you can also talk to your boss or insurance company to ask how to give notice.[4]
    • Usually this should not be an issue at all; the employer is supposed to notify you that a qualifying event has occurred and that you are eligible for COBRA. But you might need to take the lead when the qualifying event is not one that directly pertains to the employee in question. the employer, for example, is less likely to be aware of a divorce or the loss of a child's dependent status.[3]
    • Under federal law you have at least 60 days to provide notice of qualifying event, beginning with date on which the event that termination of coverage occurred.
  2. Review your COBRA election notice. Within 14 days of you notifying your insurance company that you have experienced a qualifying event, it must provide you with a COBRA election notice. This will give you all of the necessary information about your COBRA insurance options, including price. The coverage ought to be identical to that provided to active employees, meaning that should not experience any changes in healthcare quality. Now, however, you will be forced to shoulder the entire cost of the insurance and possibly more. You should ask yourself whether this is a realistic burden and consider other options if you find it to be too expensive.
  3. Sign up for COBRA. If you are satisfied with the arrangement, return the COBRA election notice to your insurance company within 60 days. You can not be asked to pay when you send in your election notice, but you will eventually need to pay premiums. The first premium payment can be charged as early as 45 days after the beginning of coverage[4].
    • The paper work should not be complex or onerous. Each provider is allowed to have their own election notice. However, the federal government has created a sample notice that only requires the printed name and signature of parties signing up for COBRA.[3]
    • You are allowed a 30 day grace period if you fail to pay your premiums on time. After that, your COBRA insurance can be terminated.
  4. Begin your search for alternative insurance within approximately a year. COBRA insurance has a maximum coverage period of 18 months for employees who have lost their jobs or had their hours reduced. For other types of events the maximum period of coverage is 36 months. Occasionally a plan might permit you to stay on longer. They also, however, can terminate coverage early, sometimes for factors outside of your control.[4]
    • Coverage can be terminated early if you do no pay premiums promptly, you become entitled to Medicare, or get coverage under a new plan. You can also, however, lose coverage if your employer ends their group health coverage.

Sources and Citations

  1. ↑ http://www.brscobra.com/History-of-COBRA
  2. ↑ 2.0 2.1 http://www.dol.gov/ebsa/publications/cobraemployee.html
  3. ↑ 3.0 3.1 3.2 3.3 http://www.bizfilings.com/toolkit/sbg/office-hr/managing-the-workplace/cobra-benefits-what-employers-need-to-know.aspx
  4. ↑ 4.0 4.1 4.2 http://www.dol.gov/ebsa/publications/cobraemployee.html#6
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