| COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) is a temporary extension of group health insurance coverage that the employee pays for. On very rare occasions an employer may agree to help pay for COBRA coverage.
Whether laid off or fired, COBRA coverage provides temporary health insurance for those losing group health insurance through an employer. Other situations such as a cut in hours and becoming ineligible for the group plan, dependents losing coverage due to a divorce, retirement, death of a spouse or parent, or a dependent turning 26 all qualify for COBRA health insurance.
It is important to note that COBRA coverage is essentially the same price per month as the employer was paying on the employee’s behalf when employed. An administration fee up to 3% may be applied to the monthly COBRA premium.
Back in 1985 before COBRA was passed into law an individual could find themselves in a tough spot. If they lost group health insurance and had serious pre-existing conditions, becoming uninsurable was a distinct possibility. Pre-1985 individual health insurance plans were medically underwritten. Very few were denied coverage outright, but most pre-existing conditions were not covered on individual plans. There were high-risk pool policies available that covered pre-existing conditions, but they were very expensive.
For many years COBRA applied to employers with 20 or more employees. Today many states, including Arizona, have passed mini-COBRA laws which apply to employers with 2 or more employees. Employees and former employees can go on COBRA for 18 months, dependents for 36 months, and SSDI disabled for 29 months.
If the employer goes out of business the COBRA participant loses coverage. If the employer group coverage changes so does the COBRA coverage. |
