The Consolidated Omnibus Budget Reconciliation Act of 1985, more commonly referred to as COBRA, is a federal law which is designed to ensure that an individual can continue to receive health insurance coverage for a period of up to 18 months following the termination of his employment. Most, but not all, companies that offer group health insurance schemes to their employees are subject to COBRA. In some circumstances coverage under COBRA can be extended from 18 months up to a maximum of 36 months.
COBRA protects individuals from losing their health insurance benefits when they lose their employment and is a temporary measure that is designed to help people through this potentially difficult time This said, not every employee who loses his employment will qualify for COBRA but employers should be conversant with the law and be able to advise their employees accordingly.
The law permits a terminated employee to purchase health insurance for himself and his family (provided the family were covered during employment) at the group coverage rate even though the employee is technically no longer a part of the group. The cost however can be high as the employee will now need to pay 100% of the cost each month, together with a surcharge of 2%.
Although most often thought of in terms of termination, COBRA can also come into effect in the event of a change of employment status such as reduced hours, or divorce from an employee of eligible status. Cover will normally continue for the time specified in the act or a shorter period if the employee takes out individual health insurance or is covered by another group health insurance plan.
Because COBRA extends a terminated employees health insurance for a period of 18 months, terminated employees do not need to worry about a change in their health insurance benefits. Coverage under COBRA insurance remains exactly the same as that provided during employment and the only change is in the responsibility for the payment of monthly premiums. It should be noted however that it is possible for the benefits under COBRA to change if an employer changes the health insurance plan being offered to current employees during the period of cover.
The important thing to remember about COBRA is that it is designed to be a temporary measure and, while that guarantees health insurance coverage for a period of up to 18 months, once this period expires you will find yourself without health insurance unless you make alternative arrangements or are covered by a group scheme from a new employer.
One of the dangers of COBRA insurance lies in the very fact that it is temporary. If, for example, you should fall ill while covered by COBRA you may find it difficult, or indeed impossible, to get future health insurance if this illness is subsequently classed as pre-existing and is ‘uninsurable’, as might be the case if you were to develop cancer.
By: Donald Saunders
Posts Tagged ‘Group Coverage’
Health Insurance – Understanding The Benefits Of COBRA
January 19th, 2010Uninsurable? Four Ways to Get Health Insurance
January 2nd, 2010
It’s a sad fact that many Americans are without health insurance. For some it’s a matter of choice, others simply can’t afford it. There is a third group however, who can afford it and desperately want it, but are unable to qualify for it because of their current or past health conditions. These are what insurance companies refer to as the “uninsurables”.
The presidential candidates this year all put forward ideas for fixing the broken health care system in this country. Hopefully, there will be sweeping changes made that will allow everyone access to affordable healthcare. In the meantime, if you are sick and uninsured, you can’t wait for the politicians to fix the system. You need help today.
Here are a few ways you can get yourself insured now:
1. Get a job. If you’re healthy enough to work, getting a job with a company that offers health insurance benefits may be your ticket to healthcare. As a new employee, you are guaranteed to get coverage. You will have to wait 6 after enrolling in the company’s insurance plan before any pre-existing conditions are covered, but after that you will have full coverage. If it has been less than 63 days since your last insurance policy lapsed, you may have what is referred to as “creditable coverage” which means that the pre-existing clause will be waived and you can get full coverage right away.
2. Start your own business. In the state of California, you can get guaranteed-issue group coverage with as few as two employees. One of these employees can even be your spouse. Things to keep in mind:
a. It must be a legitimate business, but it doesn’t have to show income for the first two years;
b. The business must be the major source of income for all employees You can’t include an “employee” who earns the majority of his/her income from another source.
c. There will still be a waiting period for pre-existing conditions (unless you’ve had creditable coverage within the last 63 days) but once the waiting period is satisfied, you’re good to go. Talk to your local health insurance agent to see if you can qualify for a group health plan.
3. Get married. No, I’m not suggesting you grab some stranger off the street and arrange a marriage of convenience. However, if you already have a life partner, or are in a serious relationship that is heading toward marriage, you might want to consider taking it to the next level. There are many legal benefits to marriage. One of them is access to your spouse’s health insurance. If your spouse-to-be is already insured through their place of work, you can be added to their policy without any underwriting requirements (usually). Again, there may be a waiting period where pre-existing conditions are excluded, but once you’ve satisfied the waiting period, you’re 100% covered.
Have your spouse-to-be check with his/her human resources department to get the full scoop.
4. Consider a mini-med product Some states have what is referred to as “mini-med” products. They are NOT major medical plans and don’t pretend to be. However, they are guaranteed issue (you can’t be declined because of poor health) and they do pay a limited benefit. Something is better than nothing. Although California does not currently offer such a product, it will very soon. We’re told it is coming “any day now.”
Check with your local health insurance agent to find out more.
By: Tamarin Martin