How does COBRA work?
Under COBRA, certain employers must offer an extension of their existing group health plan to employees who would otherwise lose coverage, allowing those who qualify to continue receiving benefits. These events typically consist of employee termination and resignation, though there are other qualifying events.
The law doesn’t apply to companies with fewer than 20 employees, the federal government, churches, and some church-related organizations. To take advantage of COBRA, you must be a qualified beneficiary and have a qualifying event.
Qualified beneficiary: A qualified beneficiary is someone who was covered under the group health plan on the day before a qualifying event. It also includes the employee’s spouse, former spouse, or dependent child.
Qualifying event: For employees, qualifying events include losing your job for any reason other than “gross misconduct” or losing benefits because of a reduction in your hours. For spouses and dependent children, qualifying events include the above circumstances, as well as the employee becoming eligible for Medicare, divorce or legal separation, or the death of the employee.
Once a qualifying event occurs, your employer generally has 30 days to notify the group health plan provider. However, if the qualifying event is a divorce, legal separation, or a child losing dependent status, it’s up to the employee, spouse, or dependent to notify the plan provider.
Once notified, the plan provider has 14 days to send a COBRA election notice informing you of your right to continue coverage and explaining how to keep your health insurance.
You then have 60 days from the election notice to decide whether you want to keep your coverage. If you elect to continue your health insurance through COBRA, coverage is available for either 18 or 36 months.
If you lost your benefits because you lost your job or experienced a reduction in working hours, you’re eligible for 18 months of coverage. You’re eligible for up to 36 months of coverage for all other qualifying events.
Some states have longer COBRA timelines than what is provided by federal law. For example, employees in California can extend their health insurance coverage for an additional 18 months after their federal protection runs out under the state’s Cal-COBRA law. It also extends COBRA protections for employees of companies with two to 19 employees.
Check with your state’s Department of Insurance or Labor to find out if any additional protection is available in your area.
Coverage under COBRA is identical to the coverage available under your group health plan while you were employed. However, COBRA applies only to group health, dental, and vision insurance. No federal law requires employers to make other types of insurance — such as life or disability insurance — available after you lose your benefits.
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