Leaving Your Job? COBRA Fills Coverage Gaps

If you are losing your job and have had group health care coverage through your company, ask your employer about COBRA.

COBRA is short for the Consolidated Omnibus Budget Reconciliation Act of 1985, a federal law that allows you to retain your employee health insurance for a limited period of time after you would otherwise lose coverage.

Generally COBRA applies to employers with 20 or more employees, although many states have COBRA-like programs for employees of smaller companies.

And while it may sound like COBRA is the answer (and it may be short term), you’ll want to look closely at it.

First, you’ll be paying the same premiums as you did under your employer’s coverage – except that your company will no longer be contributing its share. This could end up being very expensive.

If, for example, family members were covered under your employer’s plan, they also may be covered under COBRA. However, as with most group plans, dependent costs are higher on COBRA. And now you’re paying the whole shot.

Second, COBRA is intended as interim coverage. It usually lasts for 18 months but could extend to 36 months.

Third, you have approximately 60 days after your last day of coverage under your employer’s plan to apply for COBRA. Your employer should have notified you when your company coverage was being terminated, but it’s your responsibility to apply for COBRA. Ensure you ask exactly when your coverage ends.

Finally, there are alternatives. Despite the generally held belief that individual plans are more expensive than group plans, you may want to consider this route. Actually, group insurance rates (including COBRA) are usually higher than individual plan rates, so you may want to move quickly to find an individual health care plan that meets your needs.

One major benefit: Even though COBRA is a temporary fix, it does give you time to consider your options.