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Understanding COBRA Health Insurance

For most of the working population, or those who are listed as a dependent for someone in the working population, health insurance isn’t much of a concern. The reason for this is because you are part of your employer’s group health insurance plans with your employer footing part of the bill. What happens when you leave your job? What if you aren’t eligible for the group health insurance plans? That’s where a COBRA health insurance plan [3] or an individual health insurance plan steps in.

COBRA Health Insurance Plan
COBRA stands for Consolidated Omnibus Budget Reconciliation Act (COBRA) and covers a set of health benefit provisions passed by Congress in 1986. Essentially, the law added provisions to provide the continuation of health coverage that would otherwise have ended for typically up to 18 months (its 36 months for your dependents in the event of your death). You are continuing the same coverage you had before except you are paying the entire premium (instead of your employer paying part of it) and possibly a 2%, maximum, administrative fee. This also means that if your company went bankrupt, a COBRA isn’t available. You are also ineligible if you were terminated for gross misconduct.

After a “qualifying event,” such as termination, you have a sixty day period to send notice that you want to participate in the COBRA. “This period is measured from the later of the coverage loss date or the date the COBRA election notice is provided by the employer or plan administrator. [4]” Now here is the key part: Your COBRA coverage will be retroactive to the date that you lost your benefits (as long as you pay the premium). [5] Don’t waive your right to coverage, unless you’re opting to get different coverage, because if you do so you will not be covered in that waived period if you change your mind within the sixty days, which is permitted. You can waive on Day 10 and then change your mind on Day 59 and take the COBRA, but the retroactive rule wouldn’t apply and you wouldn’t get reimbursed for expenses between Days 10 and 59.

A COBRA should be considered if you seriously think you will need your health insurance because it’s an expensive option. If you’re in otherwise good health and don’t foresee needing to make a claim, the Basic Health Insurance Option (COBRA Alternative) may be your more economical option. If you have ongoing health problem, preexisting conditions, pregnant, recently declined private insurance, are taking expensive medications, or otherwise will need full and comprehensive coverage.

There are a lot of other nitty gritty details that you should read into before considering a COBRA that are too specific for this article. I personally felt that the MSN Money article [5] was particularly easy to read. Any thoughts or inaccuracies? Please let me know so I can fix them!

I’m also hoping to write an article on alternatives to COBRA, so if you know of any good resource sites, please let me know too. Thanks!