What Is COBRA?
COBRA insurance may be an option for health care coverage if you have been laid off.
If your former employer has 20 or more employees, the company is required by a 1986 federal law to offer you the option to pay for an extension of your health insurance coverage for at least 18 months. This law is known as COBRA, which stands for Consolidated Omnibus Budget Reconciliation Act.
At the time you are laid off, your employer must inform you in writing about your rights under COBRA. You then have 60 days from the date of the notice or the date your health insurance ended to enroll, or sign up for coverage under COBRA. If your company went out of business or went bankrupt, COBRA will not be available.
A tip from Dr. Mike: If you do not enroll in COBRA within the 60-day limit, you will lose your COBRA benefit.
Will COBRA Change Under Health Reform?
The Patient Protection and Affordable Care Act signed into law in March 2010 addresses access to health insurance coverage and assures that all Americans who need coverage will be able to get health insurance. The legislation does not make any changes in COBRA. However, starting in 2014, you will be able to purchase insurance in health insurance exchanges in your state or region.
How Much Does COBRA Cost?
When you sign up for COBRA, you will continue to have similar health insurance and the same health plan benefits that you had while employed. However, you must pay the health insurance premium that you paid before you were laid off plus the amount your former employer was paying for you. The employer may also add a 2% administrative fee.
Depending on your individual circumstances, COBRA can be very expensive. If you are getting coverage for yourself, you may have to pay up to $400 per month; family coverage may be more than $1000 per month. These amounts will vary depending on the benefits provided by your employer's health plan.
For example: Mary G. was laid off from her job as a computer programmer in a large insurance company. Prior to her layoff, Mary's monthly premium for her PPO health plan was $380, of which, she paid 30% ($114) and her employer paid 70% ($266). Mary elected to enroll in COBRA. Her monthly cost was $387.60 ($380 for the total amount of the premium plus the 2% administrative fee).
What If I Can't Afford the Monthly COBRA Premium?
$1,000 every month is a lot of money and probably more than you expected to pay, especially if you also lost your income and are collecting unemployment insurance. For some workers, the COBRA payments can amount to more than 60% to 70% of their monthly unemployment check. Many laid-off workers who are eligible to continue their health insurance coverage through COBRA cannot afford to do so.
If you cannot afford COBRA, there may be other health insurance options that will provide the health coverage benefits that you need for you and your family.
For example: If you and other members of your family are healthy, you may be able to find a high deductible health plan that is less expensive than COBRA. You have 60 days to make a decision about COBRA after you are laid off, so go online or make an appointment with your insurance broker to learn about your options.
If you have been laid off, read more about your health insurance options.
Am I Eligible for the Temporary COBRA Premium Reduction in the Federal Stimulus Package?
The stimulus package, which was enacted as the American Recovery and Reinvestment Act of 2009, temporarily reduces the premium for COBRA coverage for eligible individuals.
According to the U.S. Department of Labor (DOL): "Individuals who are eligible for COBRA coverage because of their own or a family member's involuntary termination from employment that occurred from September 1, 2008 through December 31, 2009 and who elect COBRA, may be eligible to pay a reduced premium. Eligible individuals pay only 35% of the full COBRA premiums under their plans for up to 9 months."
Where Can I Get More Information about COBRA and the COBRA Premium Reduction?
COBRA is regulated by the U.S. Department of Labor. The department's website has a list of frequently asked questions about COBRA. You also can call 866-444-3272 for information or assistance.
For the latest updates and accurate information about the COBRA subsidy, read FAQs For Employees About COBRA Premium Reduction Under ARRA from the DOL.