What is Cobra?

February 27, 2013

We often hear about COBRA coverage but many of us probably have forgotten the history behind COBRA.  The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, was a law passed by the United States Congress and signed by President Regan.  One part of the law was to mandate an insurance program that enables some employees to continue health insurance coverage after leaving their job.

The purpose of the insurance aspect of COBRA is to essentially require employers with 20 or more full time equivalent employees to allow these employees to maintain their health care coverage if a “qualifying event” causes them to lose coverage.  Prior to COBRA, employees would lose their jobs, perhaps due to a factory down-sizing, and suddenly be without any health care coverage.  Examples of “qualify events” are death of the covered employee, involuntary termination, layoff, or slowdown in business operations.   When an employer fails to maintain a health plan that meets COBRA requirements,  the employer will have an excise tax imposed.

COBRA coverage is usually up to 18 months.  However, if the Social Security Administration deems the individual employee is disabled then coverage may last up to 29 months.  In the case of divorce, COBRA coverage may continue for up to 36 months.  A major point is the health coverage continuation expense is solely the responsibility of the individual and not the former employer.  However, companies may have termination or exit packages that pay part or even the full amount of COBRA insurance.

A new development in 2009, is the American Recovery and Reinvestment Act that was signed by President Obama.  The act provides a 65% subsidy to employees for COBRA-enabled insurance for up to 9 months after an involuntary termination. There are some eligibility requirements for this subsidy which are:

the termination of employment was involuntary.

the terminated employee has no other group sponsored health insurance option, and

the terminated employee is otherwise eligible to enroll in COBRA.

An excellent resource for obtaining the latest information about COBRA Continuation Health Coverage is the website of the United States Department of Labor.
One of the issues with continuing COBRA insurance is that the premiums may be too expensive.  One should not feel obligated to automatically continue coverage through COBRA.   Instead, it is highly recommended that you search for affordable health insurance coverage for individuals or families by using a comparison-shopping website such as www.californiahealthplans.com.   In a matter of minutes one can quickly view various health plans and evaluate if it makes more sense to seek individual or family coverage instead of continuing with the group coverage under a COBRA plan.

Post author Loren Pleet