COBRA Health Insurance

The Consolidated Omnibus Budget Reconciliation Act (COBRA) was created by the federal government in 1985 to protect American workers who had lost their jobs. The intention of the act was to see that workers did not lose their health insurance coverage due to job loss. Before 1985, employees laid off or otherwise cut from their job involuntarily had no recourse and often found themselves without any health insurance whatsoever. COBRA give some degree of protection for workers, retirees, spouses, and dependent children.

Under COBRA health insurance is extended for up to 18 months. However, children and spouses may be able to qualify for coverage extensions for up to 36 months when they lose their dependent status. The way this would work is that eligible employees and family members would continue their coverage by paying the entire premium along with a two percent administration fee. The Act also requires employers to notify employees of their rights under the COBRA provision. On notification, workers have 60 days to decide whether or not they want to accept coverage.

Does COBRA apply to all workers? Unfortunately, the answer is no, it does not apply all employees. The law only applies to employers who had 20 or more workers in the previous year, although seasonal-type operations may or may not qualify.

State and local governments also fall under COBRA, but federal plans and certain religious organizations do not. (Federal employees do have some similar rights under another law, and if that applies to you, you should ask your human resource department for more information.) Also, COBRA generally does not apply to employees who are terminated for "gross misconduct."

More about health insurance plans here!

You may be eligible for significantly reduced COBRA premiums thanks to the Stimulus Plan. The Obama administration Stimulus Plan is also officially known as
The American Recovery and Reinvestment Act (ARRA) of 2009.

Basically, this says, that workers who have lost their jobs may qualify for a 65 percent subsidy for COBRA continuation premiums for themselves and their families for up to nine months.

Eligible workers will have to pay 35 percent of the premium to their former employers.

To qualify, a worker must have been involuntarily separated between Sept. 1, 2008, and Dec. 31, 2009. Workers who lost their jobs between Sept. 1, 2008, and enactment, but failed to initially elect COBRA because it was unaffordable, get an additional 60 days to elect COBRA and receive the subsidy.

This subsidy phases out for individuals whose modified adjusted gross income exceeds $125,000, or $250,000 for those filing joint returns. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy.

Again, not everyone is going to qualify or even be able to afford COBRA. However, the 65% reduction is huge and may allow greater numbers of unemployed than in earlier times to take advantage of this benefit.

To be eligible for COBRA coverage, you must have been enrolled in your employer's health plan while employed and the health plan must continue to be in effect for active employees. COBRA health insurance coverage is available upon when a qualifying event occurs that would, except for the COBRA provision, cause an individual to lose their coverage.

So, what are the qualifying elements? There are three elements to qualifying for COBRA benefits. COBRA establishes specific criteria for plans, qualified beneficiaries, and qualifying events:

Plan Coverage - Group health plans for employers with 20 or more employees on more than 50 percent of its typical business days in the previous calendar year are subject to COBRA. Both full and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction of an employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full time.

Qualified Beneficiaries - A qualified beneficiary generally is an individual covered by a group health plan on the day before a qualifying event who is either an employee, the employee's spouse, or an employee's dependent child. In certain cases, a retired employee, the retired employee's spouse, and the retired employee's dependent children may be qualified beneficiaries. In addition, any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary. Agents, independent contractors, and directors who participate in the group health plan may also be qualified beneficiaries.

Qualifying Events - Qualifying events are certain events that would cause an individual to lose health coverage. The type of qualifying event will determine who the qualified beneficiaries are and the amount of time that a plan must offer the health coverage to them under COBRA. A plan, at its discretion, may provide longer periods of continuation coverage.

Here is a list of qualifying events:

Qualifying Events for Employees:

• Voluntary or involuntary termination of employment for reasons other than gross misconduct


• Reduction in the number of hours of employment


Qualifying Events for Spouses:


• Voluntary or involuntary termination of the covered employee's employment for any reason other than gross misconduct


• Reduction in the hours worked by the covered employee


• Covered employee's becoming entitled to Medicare


• Divorce or legal separation of the covered employee


• Death of the covered employee


Qualifying Events for Dependent Children:


• Loss of dependent child status under the plan rules


• Voluntary or involuntary termination of the covered employee's employment for any reason other than gross misconduct


• Reduction in the hours worked by the covered employee


• Covered employee's becoming entitled to Medicare


• Divorce or legal separation of the covered employee


• Death of the covered employee


• Reduction in the number of hours of employment