If you have ever been left in health insurance limbo then there is a good chance that you have heard of Cobra coverage at some point. If you’re about to find yourself on it, then you might have a few questions, and we just can’t blame you for that. Let’s talk a bit about what Cobra is and most importantly, what you can expect from it.
The first thing that you need to know, is that COBRA came from the Budget Reconciliation Act of 1985 which would require employers who offered group insurance plans to allow employees to continue their coverage even if they have been terminated, laid off, or experienced some other change in the status of their employment. This type of coverage ensures that the individual and their family will be able to continue receiving healthcare for the duration of the ‘gap’ period, and of course, will have the peace of mind that they need as they search for their next source of income.
What Does COBRA Have to Offer?
When it comes to figuring out what COBRA can offer you, the very first thing that you will want to look at the amount of time for which you would be covered should you lose your insurance coverage. To start, you would be covered for up to eighteen months, and this coverage goes for spouses, dependents, employees, etc. While COBRA does need to cover the employee for a period of eighteen months it is possible to have it expended for up to twenty-nine months if the employee has been disabled during the initial sixty days of coverage, and this does also apply to the nondisabled beneficiaries of the insured individual. In other words, COBRA will have you covered no matter what.
Qualifying Events for Spouses
COBRA does cover spouses for up to 36 months along with dependents who are facing a loss of coverage due to a change in status. Some examples will include employee’s death, divorce, legal separation, or a few other qualifying events. All of this depends however on the individual in question being a qualified beneficiary, so who exactly is one? To put it as simply as possible, a beneficiary is someone who is under the plan. In order for this to work, they must be under the plan immediately prior to the event, and the individual in question will need to be:
- Dependent Child of Covered Employee
- Covered Employee
To answer a question that may or may not come up during the course of this article, yes, newborns are considered to be qualified beneficiaries. This includes children who are placed for adoption with the covered employee during the course of the coverage.
Defining a Covered Employee
Under the COBRA health insurance plan, a covered employee is someone who was provided coverage under a group health plan, and the definition can be easily expanded to include the following:
- Independent Contractors
- Self-Employed Individuals
Plans That are Subject to COBRA
There is a wide range of plans that are subject to COBRA and it generally includes all plans that are maintained by employers and provided to employees. In other words, the group health insurance plans purchased through the ACA by small business owners and others are always going to be subject to COBRA provisions. Some of the most common institutions include:
- Tax Exempt Organizations
- State/Local Governments
These plans are all subject to COBRA, which brings us, finally to the million dollar question: which plans are NOT subject to COBRA?
Plans that are NOT Subject to COBRA
There are certainly a wide variety of plans that are not subject to COBRA and are in fact entirely exempt. The first one that we are going to mention is the small employer plan.
Small Employer Plans
Small employer plans will be completely exempt from COBRA. So what is a small employer plan exactly? Basically, if the business has fewer than 20 employees then the employer is under no obligation to provide COBRA to former employees.
Federal Government Group Health Plan
The group health plan provided by the Federal government is not covered by COBRA nor is it subject to it. They are however subject to a different plan covered by the Federal Employees Health Benefits Amendments Act of 1988 which requires them to offer employees continuation coverage.
There are certain church plans which are not subject to COBRA, and the IRS concluded that a plan for employees operating under the auspices of a church is on a church plan. If you happen to be working for a church, this is definitely something that you will want to ask about in order to determine whether or not you are covered if the worst happens.
The Best Backup Plan
COBRA coverage might not necessarily be a long-term medical plan but it is an outstanding backup plan for those who are about to find themselves kicked off of their employer-provided coverage. The plan will ensure that you’re covered during the in-between times, and it will make sure that you have very little to worry about as you’re starting a new job, or trying to get your life in order for whatever reason. Checking to make sure you can survive the darker periods of your life should be of the utmost importance – let COBRA guide you!