COBRA Extended Health Insurance Benefits

If you are (or recently were) covered by an employer-provided group health insurance plan, then your employee rights might entitle you to COBRA extended heath insurance benefits if you quit or get laid off or fired from your job, for reasons other than gross misconduct on your part. The same goes if you suffer a significant reduction in work hours.

If you're a dependant (beneficiary) of an employee who is covered by an employer-provided group health insurance plan, but the employee dies or divorces you and your coverage ends because of the event, then you might be eligible for COBRA extended heath insurance benefits on your own.

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. It's a Federal law that requires employers who have 20 or more employees and who voluntarily provide group health insurance benefits, to also provide temporarily-extended health insurance benefits to employees and/or their beneficiaries when a "qualifying event" occurs.

As indicated, qualifying events under the Act include employment termination and a reduction in work hours, as well as certain life events that affect beneficiaries of covered employees. Generally, an employer must notify its COBRA plan administrator of a qualifying event within 30 days, and then the plan administrator must notify covered employees of their COBRA eligibility within 14 days.

However, in the case of a divorce or legal separation, a covered employee or the employee's covered beneficiaries must notify the plan administrator of the qualifying event. The time limit for providing such a notice varies depending on plan rules, but it can't be fewer than 60 days.

After you receive notice that you are eligible for COBRA insurance, then you will have a limited but reasonable amount of time to purchase your extended health insurance benefits at group rates, plus an administration fee of up to two percent if applicable. Such a notice is generally referred to as a COBRA election notice.

Because it's a temporary extension, your COBRA health insurance benefits will be the same as the group health insurance benefits that you had through an employer, unless the employer permits you to change your coverage. At this writing, your employee rights entitle you to purchase COBRA insurance benefits for up to 18 or 36 months, depending on your circumstances.

COBRA extends only group health insurance benefits. It does not extend disability, long-term care or life insurance benefits. Extensions of other employee benefits at employment termination are matter of contractual agreement between employers and employees or employers and unions.

If your COBRA insurance benefits run out before you can become covered by a new employer-provided group health plan, then your employee rights under the Health Insurance Portability and Accountability Act (HIPAA) might entitle you to continue purchasing health insurance through a new plan, without pre-existing condition limitations and large premium increases.

Some states have enacted laws that are equivalent to the Federal COBRA and HIPAA laws. (State equivalents are sometimes referred to as "mini-COBRA laws" and "mini-HIPAA laws".) If your work state has enacted an equivalent law, then your employee rights entitle you to whichever provisions are the most generous under the Federal or state version.

Although convenient and better than none, COBRA health insurance coverage can be quite expensive. Even "group rate" health insurance is nowhere near cheap; worse, employers typically do not help to pay the premiums for COBRA health insurance, as they often do for traditional group plans.

In other words, you'll probably have to pay full, expensive, COBRA insurance premiums on your own, plus the administration fee if applicable. When between jobs, that might hurt you financially just when you need money the most.

So, before purchasing COBRA insurance, you might want to shop around for a better short-term health insurance deal through eHealthInsurance or other providers. If you can get between jobs with less coverage than you'll have through COBRA, then your savings could be more substantial.

If you shop around, be sure to investigate pre-existing condition limitations and other coverage differences compared to your COBRA plan. Also investigate your HIPAA portability rights.

See Health Plans & Benefits at the U.S. Department of Labor's Web site to research your COBRA and HIPAA employee rights. Consult an attorney for legal advice.