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How Does COBRA Insurance Cover Between Jobs?

by Mark Applegate

The Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed into law in 1986, replacing the Retirement Income Security Act and the Public Health Service Act to allow for continuation of health insurance benefits when people are between jobs. Several facets of this benefit should be considered to protect yourself from substantial liability.

Overview

COBRA is a coverage gap provision that allows you to remain on an employer's group health insurance policy by paying the entire premium up to 102 percent of the original coverage cost. You can maintain COBRA coverage for up to 18 months, although disability and other provisions can allow further extension. Maintaining this coverage allows you to benefit by keeping previously paid deductibles and will help you avoid the pre-existing condition limitations of buying new coverage.

Qualification

COBRA coverage must be allowed by group insurers covering 20 or more employees. The coverage is available if you are voluntarily or involuntarily terminated for any reason other than gross misconduct. It can also apply if you face a substantial loss of hours. COBRA benefits also apply to spousal or children's coverage with the same misconduct restriction. In addition, if the covered spouse becomes eligible for Medicare, divorces the spouse or passes away, the spouse is still eligible for COBRA provisions. Insurances covered by COBRA benefits include: health, dental, vision, prescription, HMO provisions, Employee Assistance Plans, on-site health care and cafeteria plans.

Restrictions

If you initially waive COBRA coverage even after you receive your mandatory notice of COBRA availability, you can still receive COBRA benefits from the date you rescind the waiver and pay your first month's premium. If you fail to pay COBRA premiums or if the employer ceases to offer health insurance coverage, your coverage ends. The coverage also ends if you enroll in new coverage through another employer or an independent insurer if the new coverage doesn't exclude pre-existing conditions covered by COBRA. If you become eligible for Medicare the coverage also ends. This exclusion does not apply if you already had Medicare when you became eligible for COBRA.

Other Considerations

Your benefits from COBRA coverage are the same as standard policy holders' including any new provisions or changes made to the policy. Election periods for COBRA members are the same as standard policy holders. If your employer offers multiple insurance options such as life, health and vision coverage, you can still choose among available options. If the employer only offers one choice with all of these same coverages, you must choose either all of them or none at all.

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