Although the COBRA health insurance subsidy will not be made permanent, it has been extended to cover all persons who lost their jobs prior to May 31, 2010. Recent temporary changes have made COBRA more affordable for those who were involuntarily terminated.
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COBRA is well known for being very expensive health insurance coverage, yet it is a life saver for anyone who is suddenly found without their group insurance due to the loss of a job. Whether you quit or get fired, COBRA is an option that extends your health insurance for a period of up to 18 months.
How COBRA Health Insurance Works
COBRA was initiated in 1985 in part so that people who were suddenly, whether planned or not, without group health insurance would be able to continue to receive health insurance benefits. This was intended to help persons who were laid off or fired as well as persons who voluntarily quit their job. Since most new employer insurance has a waiting period, people who quit their job to work elsewhere would oftentimes be faced with a lapse in insurance while waiting for the new insurance to begin.
The continuation coverage must be offered by any employer who employs more than 19 people. COBRA can be offered to employees as well as members of the employee’s family, such as in the case of a recent widow or widower. The health benefits you receive under COBRA are the same as the other members in your group insurance plan; the only difference is the cost of the premium for which you will now be responsible for the full cost.
The Cost of COBRA Health Insurance
Of course, COBRA does not come without a cost. What COBRA does is require your former employer to allow you to keep your health insurance coverage for a time being; it does not require your former employer to continue to help pay for those benefits. Since most group insurance is paid for in part by the employer, losing this assistance can drastically raise the cost of your premium.
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For an example of how this works, let’s assume you have individual group health insurance for $300 per month. Your employer pays two thirds of your premium for you as an employee benefit, so they pay $200 and your cost for your health insurance is only $100. This $100 is usually taken out of your weekly paycheck at $25 per week, which is a relatively painless way to afford health insurance.
Now, you quit, get fired, or are laid off and you are faced with not having health insurance. COBRA steps in and offers to extend to you your same group health insurance coverage, only now the full cost of the premium is passed on to you. Therefore, your health insurance coverage will now cost you the full $300 per month, plus any administration fees, up to 2%, that can legally be charged to you by your employer.
While COBRA gives you the option of maintaining your health insurance coverage, it is more expensive then you are used to paying. However, it is usually a good way to maintain some form of coverage between jobs.
How the COBRA Health Insurance Subsidy Helps
The ARRA (American Recovery and Investment Act) was implemented in 2009 to offer some relief of COBRA health insurance cost through a subsidy program. Employees who are eligible for the COBRA subsidy program only pay 35% of the premium while tax credits cover the remaining 65%.
In order to be eligible, an employee must have been involuntarily terminated during the period from September 1, 2008 through May 31, 2010. Anyone who qualifies for group health insurance through a new employer or through a spouse does not qualify for the reduction.
While there has been some talk of the COBRA health insurance subsidy being made permanent or at least being further extended, the program terminated on May 31, 2010. This means that anyone who is eligible for coverage must have been involuntarily terminated by May 31, 2010. COBRA coverage is then valid for 15 to 18 months after the enrollment date. Anyone who is fired after May 31, 2010 can still enroll in COBRA; they just won’t have the premium subsidy option and will have to pay the full premium for health insurance coverage.
Enrolling in COBRA can help you maintain health insurance while you wait for new group insurance to start, join a family plan through your spouse, or buy private health insurance. Buying private health insurance may or may not be more expensive than COBRA, but COBRA is only intended to be short term while you secure health insurance coverage elsewhere. The COBRA health insurance subsidy plan can help reduce your costs in the interim, but then you will need to shop around for health insurance rates in order to find affordable coverage for you or your family.
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