You would have surely heard about COBRA insurance if you switched from one job to the other. However, the question is, “do you know what is COBRA and what its significance is?”
In the year 1985, the US Congress approved the Consolidated Omnibus Budget Reconciliation Act law. The approval of this law brought about changes to the Employee Retirement Income Security Act and Public Health Service Act, in conjunction with the IRS code.
This law was passed in order to enable people to avail the benefits of coverage under group health insurance plan for a certain time after resigning from their job. This act enables people to avail this coverage for a period of up to 18 months.
The functioning of COBRA
An individual will have to meet three criteria in order to avail insurance under COBRA. The three criteria that qualify you to avail is benefit are:
- A “qualifying employer” should provide you with the group health insurance plan.
- The individual must be a “qualifying beneficiary” and
- The coverage can be availed for a “qualified event”
This law is applicable for all large and even medium sized business corporations.
In order for an employer to be classified as a “qualified employer”, the following conditions need to be met. First of all, the employer should have more than 20 employees and should offer group health plan to them. Also, at least 50% of the employees in the organization should be covered under this plan.
To be classified as a “qualified beneficiary”, the individual should have worked for the “qualifying employer” or should be the spouse of such an employee or the child dependent on the employee. The benefits of COBRA are also extended to independent contractors as well.
There are various qualifying events that are dependent on the beneficiary. Qualifying events in the case of employees are the decrease in the number of working hours. End of employment for employees because of any valid reason, excluding “gross misconduct” is also a qualifying event for them.
Let us take a look at the events classified as “qualified events” for the dependents of the employees, including their spouse and children. They are eligible if there is a valid reason for the employee leaving the organization. Any reason excluding “gross misconduct” is more or less considered valid. If the employee who is covered undergoes a legal separation or divorce from his/her spouse or dies is also considered under qualifying events. Children of employees are covered until they reach the age of 18 when they lose the “dependent” status.
Exclusions in COBRA
While COBRA will allow you coverage despite quitting your job, it will have to be under your expense and not that of your previous employer. In addition to the regular premium, you will also be charged an administrative charge of 2%.
That, unfortunately, means the cost of coverage under COBRA will prove to be more expensive than individual health plan costs which surprises many people. Despite this drawback, there are more many reasons for you to avail insurance under COBRA.
First of all, there will be exclusions and limitations on your coverage if you opt for a new health plan. By opting for credible coverage, you can eliminate these limitations. It is a wise choice to have good health coverage irrespective of your circumstances.
Obtain free COBRA quotes online and see how easy it is to stay covered at all times.