What is COBRA? The Consolidated Omnibus Budget Reconciliation Act (COBRA) is federal law that extends your current group health insurance when you experience a qualifying event such as termination of employment or reduction of hours to part-time status.
If you have left employment, and your former employer offered group insurance and qualifies for COBRA, the law allows former employees, retirees, and their dependents to temporarily keep their health coverage at group rates.
COBRA premium is more expensive than group insurance. Why? When you are employed, your employer usually pays some or all of the premium for your health insurance. COBRA participants pay the entire premium themselves. It may or may not be less expensive than individual coverage. Individual coverage offered in your State may be less expensive than COBRA. You can collect COBRA benefits for up to 18 months which may be extended under certain circumstances.
To be eligible for COBRA, your group policy must be in force with 20 or more employees covered on more than 50 percent of its typical business days in the previous calendar year.
Indemnity policies, PPOs, HMOs, and self-insured plans are all eligible for COBRA extension; however, federal government employee plans and church plans are exempt from COBRA. Individual health insurance is also exempt from COBRA extension.
If your employer has 20 or more employees they must follow COBRA rules. You have responsibilities to make sure your COBRA coverage goes into effect and stays in effect. You must decide to accept or reject COBRA during a certain time period (usually 60 days after notification from employer). Your former employer’s plan administrator must mail you the COBRA information and forms within 14 days after receiving notification from your former employer of the qualifying event. If you do not ask for COBRA coverage before the deadline you may lose the right to COBRA coverage. You must also be sure to pay your monthly premiums or you can lose your coverage.
Once you have exhausted your COBRA benefits, you may be entitled to a Special Enrollment Period under the Affordable Care Act which allows you to get an individual health coverage.
What is Cal-COBRA?
Cal-COBRA is California law that has similar provisions to federal COBRA. With Cal-COBRA the group policy must be in force with 2-19 employees covered on at least 50 percent of its working days during:
- the preceding calendar year, or,
- the preceding calendar quarter, if the employer was not in business during any part of the preceding calendar year.
Eligibility for Cal-COBRA extends to indemnity policies, PPOs, and HMOs only. Self-insured plans are not eligible. Unlike COBRA, church plans are eligible under Cal-COBRA. Cal-COBRA does not apply to individual health insurance.
California Insurance Code (CIC) Section 10128.59 provides extension under Cal-COBRA for those who have exhausted their 18 months on federal COBRA (or longer in special circumstances) for a total extension that cannot exceed 36 months. For the special Cal-COBRA extension to apply, you must have become eligible for COBRA after January 1, 2003, and the employer’s master policy must be issued in California. If the group master policy is not issued in California, then the employer must employ 51% or more of its employees in California and have its principal place of business in California for their California employees to take advantage of Cal-COBRA.
Under the Affordable Care Act (“Obamacare”), insurance companies cannot deny insurance application from individuals due to the reason of pre-existing medical conditions. Because of this new law, the necessity of COBRA is much less.