Group health insurance is one of the benefits of working for an employer, but if you are fired or quit your health insurance options will need to be re-examined. Although COBRA gives you the option of extending your employer health insurance beyond your termination date, it can be very expensive and it is only available for a limited time.
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Regardless of why your employment is terminated, whether you are fired (except in cases of gross misconduct) or you quit, your employer must offer you COBRA as a requirement of law. It is up to you to either choose COBRA in order to continue your employer health insurance or to allow your health insurance plan to terminate with your employment.
COBRA as Employer Health Insurance
In 1985, the government passed a law that required the continuation of health coverage for employees who were either fired or chose to quit their employment. The Consolidated Omnibus Budget Reconciliation Act, better known as COBRA, set forth the requirements that made this continued health coverage possible.
COBRA makes it possible for either an individual or a family to continue having health insurance coverage even when he is no longer employed by the company with whom he had health insurance. In addition to getting fired or quitting, your employer may offer you COBRA due to a reduction in the employee’s hours or the company undergoing bankruptcy. The employer is also required to offer COBRA to an employee’s covered spouse or dependents in the event there is a divorce, the employee becomes eligible for Medicare, or the employee dies.
COBRA is only available for a period of either 18 months or 36 months depending on the event that caused the need for COBRA. This amount of time is usually sufficient to give a terminated employee a chance to enroll in a new employer’s health plan, join a spouse’s health insurance plan, or purchase private health insurance. If additional time is needed you may be able to file for a continuation. You will pay higher insurance rates with COBRA than you did though the group plan.
The Details of COBRA when Offered as Employer Health Insurance
Not every employer is obligated to offer COBRA, but if their group health plan has more than 19 employees on the policy then they are usually required to participate. Within 30 days of quitting or getting fired, your employer will provide you with details and the necessary paperwork to participate in COBRA. You need to make a decision regarding your election of COBRA within 60 days of the notice or within 60 days of your last day of coverage if that is the later date.
Some people are under the notion that COBRA extends your employer health insurance without any change to you. However, that is not the case. Whether you quit or are fired, under COBRA you are responsible for the full premium of your share for the group health insurance plan. Your employer has the right to charge you 100% of your cost of the plan’s premiums plus a 2% administration fee to cover the employer’s expense for continuing to carry you on the policy.
Other than the higher price you are paying for your employer health insurance plan, there are no other changes to your health insurance policy. You will continue to receive the same benefits as well as pay the same deductibles, co-payments, and other out of pocket expenses that are outlined by your health insurance policy.
Continuing Employer Health Insurance after COBRA
Once COBRA has been exhausted and no more continuations exist, then your employer health insurance will officially come to an end. If you have not secured a new health insurance plan in the meantime you should do so as soon as possible. It is not recommended to go without health insurance for more than two months.
The Health Insurance Portability and Accountability Act (HIPAA) of 1996 made it possible to get insurance coverage with a pre-existing coverage provided you don’t have a lapse in health insurance coverage for more than 63 days. COBRA counts as coverage for this provision.
The health insurance you have through your employer may qualify for COBRA if you are fired or quit, giving you an extension on your current group health plan for a limited time. The full cost of the premiums will default to you, which will most likely be a substantial increase in comparison to what you were paying when your employer contributed to your health insurance plan.
However, COBRA can still be less expensive than private health insurance. If you do not find another group health insurance plan then private health insurance is the alternate choice.
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