COBRA – continuing your employer provided health insurance after you leave employment.

The employee and the dependents covered on the employee’s group health insurance have the opportunity to continue their health insurance after the employee has left employer, voluntarily or involuntarily, under a law titled the Consolidated Omnibus Budget Reconciliation Act (COBRA).  Divorced spouses and children who lose their eligibility because the plan no longer covers them because of their age also have the opportunity to continue their health insurance.

People who wish to continue their coverage under the employer’s health insurance must tell the employer they want to continue the health insurance and pay for the health insurance coverage.  This article explains how to elect COBRA coverage and how and when to pay COBRA the premiums.

Who is eligible for COBRA?

The employee and each dependent on the employee’s group health insurance plan on the day the employee loses his group insurance have an independent right to continue coverage. An independent right to continue coverage means the spouse or children can elect COBRA even if the employee does not elect COBRA coverage.

How long does COBRA coverage last?

The length of COBRA coverage eligibility depends on the reason for the loss of coverage. COBRA coverage eligibility can be for 18, 29, or 36 months, based on the reason for the loss of coverage.

COBRA coverage is dependent on the people electing COBRA paying the health insurance premium.  A person electing COBRA coverage will permanently lose that coverage if the premiums are not paid.

COBRA eligibility for 18 months – if the employee loses health insurance coverage because of loss of employment or because a reduction of work hours makes the employee ineligible for health insurance, then the employee and all dependents on the employee health insurance plan on the day the employee loses his group insurance are eligible to continue coverage for up to 18 months.

Loss of employment means any separation of employment including a voluntary quit, lay off, or involuntary termination.  An employer can deny COBRA eligibility to the employee and all dependents if the employer terminated the employee for gross misconduct.

COBRA eligibility for 29 months - If a person on COBRA is disabled before or during the first 60 days of COBRA coverage, that person and any family members can elect to have their COBRA coverage extended to 29 months. The disabled individual must obtain a determination of disability from the Social Security Administration before or within the initial 18-month COBRA period and provide a copy of the determination to the plan sponsor within 60 days of receipt and before the end of the initial 18-month COBRA period.

COBRA eligibility for 24 months - Spouses and dependent children covered by the group health plan elect COBRA coverage for up to 36 months for:

1. The death of the covered employee.
2. Divorce or legal separation from the covered employee.
3. The covered employee becomes entitled to Medicare.
4. The child ceases to be a dependent under the provisions of the group health plan.

How does one elect COBRA?

When an employee loses their employer provided health insurance, the employer will send a COBRA election notice to the employee’s last known address.  That notice applies to the employee and all dependents covered on the plan.  That notices will explain how and when to elect COBRA. 

Each dependent has 60 days from the date the COBRA election notice was mailed to elect coverage.  Instruction on how to elect the coverage will be in the COBRA election notice.

Once a dependent elects coverage, the dependent has another 45 days to make the first COBRA payment.  Instructions on how to make COBRA payments are also part of the COBRA election notice.

A spouse may lose their eligibility for health coverage because of a divorce or dependents may lose their eligibility for health coverage when they reach an age where they are no longer covered under the group health plan.  When this happens the divorced spouse or the dependent must notify the employer they want to elect COBRA within 60 days of the divorce or birthday of the dependent.

How does one pay the COBRA premium?

The cost of COBRA will be explained in the COBRA election notice.  The employer can require people wanting to continue the insurance to pay the full cost of the premium, plus a 2% administrative fee.  The COBRA election notice will explain how, when, and where to make these payments.  Understand and follow these payment instructions.  A late payment or missed payment will cause loss of continued COBRA coverage.

How can one lose COBRA coverage?

People can lose COBRA coverage when any of the following occur:

1. Failure to pay premiums. COBRA coverage terminates if the premium is not paid. Coverage will not be reinstated once a premium payment is missed.
2. Coverage under another employer’s plan.  People with COBRA coverage lose their eligibility for COBRA coverage when they are covered under a different group health plan
3. Medicare. People with COBRA coverage who enroll in Medicare after the date of their COBRA election lose their COBRA coverage.
4. Ceasing to be disabled. COBRA coverage beyond 18 months will be terminated if the Social Security Administration makes a final determination that a person with COBRA coverage is no longer disabled.
5.  Termination of the employer’s health plan. Termination of a health plan terminates COBRA rights under that plan provided the employer does not replace the health plan and does not maintain any other health plan at any of its other locations.

COBRA and the Affordable Care Act

People offered COBRA need to be aware of how electing COBRA affects eligibility for health care coverage in the health care marketplace.  When a person first loses group health insurance that person can elect COBRA or coverage in the health care marketplace even if the election will be made outside the health care marketplace’s open enrollment.

However, a person on COBRA cannot stop paying their COBRA and enroll in the health care marketplace at any other time except during the health care marketplace’s open enrollment. The person on COBRA who drops their COBRA coverage because the premiums are too costly will be without insurance until the health care marketplace open enrollment.

Additional information about COBRA:

An Employee’s Guide to Health Insurance Coverage published by the U.S. Department of Labor is located here.

COBRA coverage frequently asked questions published by the U.S. Department of Labor is located here.