What is COBRA?
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, which became law in 1986. COBRA gives you the right to choose to keep the group health insurance benefits that you would otherwise lose after you reduce your work hours, quit your job, or lose your job. In most cases, you can keep the insurance for up to 18 months. Some people may be able keep it a few months longer.
COBRA also lets family members choose to keep health insurance after your job loss or other qualifying event that would normally cause them to lose the coverage they have through your employer. (See the section called "What is a qualifying event under COBRA?" for more on this.) COBRA applies only to nearly all employers with 20 or more employees.
Before COBRA, when employees left their companies, they and any covered family members lost their health insurance right away. If the employee or a family member were ill, they were often not able to get new health insurance because they were already sick. COBRA allows an employee to buy health insurance through the employer even though the person no longer works there or no longer works full time.
How long does the COBRA coverage last?
The length of time you can keep COBRA coverage depends on your qualifying event (see the next section). If your major medical coverage ends because your employment ends (other than for gross misconduct), or because your hours are reduced, you and your qualified dependents are allowed to keep coverage under the employer's health insurance for up to 18 months by paying for the full cost of the coverage.
For people with disabilities
Certain people with a disability may also qualify for an extra 11 months of COBRA coverage. (This makes a total of 29 months of coverage -- the original 18 months plus the 11-month extension.) But the plan can charge an increased premium of up to 150% of the cost of coverage during the 11-month disability extension. To qualify for the disability extension, the person must:
- Get a formal disability determination from the Social Security Administration (SSA) that shows they were disabled at the time (or within 60 days) of their COBRA qualifying event.
- Have the disability during the rest of the 18 months of coverage.
This means that the person must apply for disability through the SSA and wait for their decision (determination) about whether or not he or she is truly disabled. After getting the SSA decision, the employee must send a copy of the letter to the health plan administrator within 60 days of receiving the letter and before the 18 months of coverage ends.
Later on, if Social Security determines the disability no longer exists and the person is not employed, COBRA coverage may be discontinued in the month that begins more than 30 days after Social Security's decision. The beneficiary must notify the health plan administrator of the final decision from Social Security.
For dependents
Lastly, dependents who lose job-based coverage due to a change in the family (such as divorce or other qualifying event) can still get COBRA coverage for up to 36 months. (See the section, "What is a qualifying event under COBRA?") People with COBRA coverage have the same health benefits and rights as active employees. For example, they can change plan options during open enrollment periods and parents can add newborns and newly adopted children to their COBRA policies.
What is a "qualifying event" under COBRA?
A qualifying event makes employees or their dependents lose their group health coverage and qualify for COBRA coverage.
Qualifying events for the employee
Qualifying events for the employee include loss of health insurance because of:
- Termination of employment (The employee quits, is laid off, or fired for anything other than gross misconduct.)
- Reduction in work hours (for reasons other than gross misconduct)
Qualifying events for the spouse or dependents of the employee
Qualifying events for the spouse or dependents of the employee who had been included on the employee's health plan include:
- The insured employee's death
- Divorce or legal separation from the insured employee
- Loss of dependent status (as defined by the insurance plan's rules)
- Employee becomes entitled to Medicare and the employer takes him or her off the health insurance plan
- Any event in the list above that causes the employee to lose health coverage
The employee's qualified spouse or children may enroll in COBRA even if the employee does not.
What is a "qualifying event notice" under COBRA?
Before a group health plan must offer COBRA coverage, the group health plan administrator must be notified of the qualifying event. The employer has 30 days after the event happens and must notify the plan if the qualifying event is any of the following:
- Employee job loss
- Reduced hours of the employee
- Employee death
- The employee becomes eligible for Medicare
- Employer files for Chapter 11 bankruptcy
The employee or dependent must notify the group health plan administrator within 60 days of these family changes:
- Divorce
- Legal separation
- Child's loss of dependent status
How to go about doing this should be outlined in the summary of plan description (SPD) you get from your employer when you enroll in a health plan. If your employer does not have a procedure for notifying the health plan, you can give notice by contacting the person or unit that handles your employee benefits.
What is an "election notice"?
Within 14 days of getting the qualifying event notice (above), the employer or health plan administrator must give the person who is about to lose health insurance written notice of his or her COBRA rights. The election notice should contain all of the information you will need to understand COBRA coverage so that you can make an informed decision on whether or not to continue coverage. It should also give you the name of the person who handles COBRA for the health plan (the COBRA administrator) and tell you how to get more information.
What do I do once I get the COBRA election notice?
The employee or qualified dependents have 60 days after they get the election notice to choose health insurance coverage for themselves under COBRA. The employee or dependent must notify the COBRA administrator listed on their COBRA election notice in writing if they wish to keep their health insurance. The COBRA administrator is the person who keeps up with COBRA continuation benefits for the employer.
How long do I have before I must pay the first COBRA premium?
You have 45 days from the date you chose to continue health insurance coverage with COBRA to pay the first premium bill. That payment generally must cover the period of coverage from the date COBRA was chosen all the way back to the date of the loss of coverage due to the qualifying event. Be aware that neither the health plan administrator nor the employer is required to send you monthly premium notices or "bills," so make sure you pay attention to due dates.
How much does COBRA cost?
The premium for COBRA coverage is equal to the full cost of your group health coverage -- including the employer and employee share -- plus up to 2% more for administrative costs. This is usually much more than the employee paid when he or she worked for the company, since the company then probably paid for part of the premium. But it still usually costs less than buying individual health coverage. Some employers may give you the option of dropping out of "non-traditional" insurance plans, such as dental and vision coverage, in order to reduce costs.
If you have already had the 18-month standard COBRA coverage and have started on the 11-month disability extension, the premium may be much higher. In this case, the employer may charge up to 150% of the actual insurance cost.
How long do I need to have a job in order to be covered under COBRA?
You are eligible for COBRA coverage if you were covered under the group health plan on the day before your qualifying event. This 1-day rule also applies to your spouse and dependents who were covered under the plan.
Under what conditions is COBRA discontinued?
COBRA coverage is discontinued under the following circumstances:
- The covered person becomes covered under another group plan or becomes eligible for Medicare. If the new plan has a waiting period for pre-existing conditions, you may choose to have coverage under COBRA along with the new plan.
- The covered person does not pay the premiums for the continued coverage. There is a 30-day grace period to pay premiums, but your coverage may be put on hold for late payments. For example, if you do not pay a premium by the first day of a period of coverage, the plan may cancel your coverage. But if you pay before the grace period ends, they will reinstate coverage retroactively back to the date your COBRA coverage started. If you don't pay in full before the end of the grace period you could lose all COBRA rights.
- The employer stops providing a group health plan to all employees.
- The covered person does something (such as fraud) that would justify the plan stopping coverage of a similar participant or beneficiary who is under the group plan (not receiving continuation coverage).
The employer is required to notify the employee if COBRA is canceled early.
Is my dependent eligible for COBRA if his or her insurance coverage with my plan ends?
If coverage for your dependent(s) ends for the following reasons, their coverage may be continued for up to 36 months:
- Your death
- Your divorce or legal separation
- You lose health insurance because you become eligible for Medicare
- A dependent's change in status to ineligible under your health insurance plan (a child comes of age, gets married, etc.)
What about the person who has been covered under COBRA for 36 months and is almost but not quite 65?
Thirty-six months is the maximum amount of continuation coverage under COBRA. Employers may extend your continuation coverage for a longer period, but COBRA does not require it. A few states require the group health insurers they regulate to extend continuation coverage until the age of Medicare eligibility.
How can I find out more about COBRA?
Rising medical costs have made health insurance a household necessity for most people, especially those with major illnesses like cancer. The COBRA law gives people a chance to hold on to this important benefit for a while longer. Still, workers need to be aware of changes in health care laws to keep their benefit rights. A good place to look is in your health insurance plan booklet or with the person who manages your plan. Most of the specific rules on COBRA benefits can be found in 1 of these 2 resources.
For more information about COBRA, call the Employee Benefits Security Administration at 1-866-444-3272 or visit their Web site at www.dol.gov/ebsa/. You can also find a detailed brochure called An Employee's Guide to Health Benefits Under COBRA, on the Web at www.dol.gov/ebsa/pdf/cobraemployee.pdf.
If you have questions about your state's requirements about COBRA and health insurance, you can find your state's insurance department by contacting the National Association of Insurance Commissioners (see "To learn more").
To learn more
More information from your American Cancer Society
The following related information may also be helpful to you. These materials may be ordered from our toll-free number, 1-800-227-2345.
Health Insurance and Financial Assistance for the Cancer Patient (also available in Spanish)
Children Diagnosed With Cancer: Financial and Insurance Issues
Americans With Disabilities Act: Information for People Facing Cancer
Family and Medical Leave Act (FMLA)
Prescription Drug Assistance Programs (also available in Spanish)
Women's Health and Cancer Rights Act (also available in Spanish)
The Affordable Care Act: How It Helps People With Cancer and Their Families
Financial Guidance for Cancer Survivors and Their Families: Advanced Illness
Financial Guidance for Cancer Survivors and Their Families: In Treatment (also available in Spanish)
Financial Guidance for Cancer Survivors and Their Families: Off Treatment
Financial Guidance for Those With Concerns About Cancer: Can I be Prepared if Cancer Occurs?
Clinical Trials: State Laws Regarding Insurance Coverage
National organizations and Web sites*
Along with the American Cancer Society, other sources of information and support include:*
Centers for Medicare & Medicaid Services (CMS) -- HHS
Toll-free number: 1-800-633-4227
TTY: 1-877-486-2048
Web site: www.cms.hhs.gov
For more information on COBRA, as well as Medicare, Medicaid, and other government-funded programs
Health Insurance Info, Georgetown University Health Policy Institute
Web site: healthinsuranceinfo.net
Offers free online "Consumer Guides for Getting and Keeping Health Insurance" for each state, information to help understand how medical insurance works, and newsletters about protections that are available to consumers
National Association of Insurance Commissioners (NAIC)
Toll-free number: 1-866-470-6242 (1-866-470-NAIC)
Web site: www.naic.org
Has information about insurance and insurance companies and how to file a consumer complaint with state insurance departments. For state insurance department phone numbers, visit: www.naic.org/state_web_map.htm
Patient Services Incorporated (PSI)
Toll-free number: 1-800-366-7741 (ask to be connected to the Oncology Intake Department)
Web site: www.uneedpsi.org/
Offers financial aid to people with cancer that has spread to the bone, CML, CTCL, and GIST. Also helps them find and buy health insurance.
US Department of Labor, Employee Benefits Security Administration (EBSA)
Toll-free number: 1-866-444-3272 (1-866-444-EBSA)
Web site: www.dol.gov/ebsa
Has fact sheets and information on many different legal, health care, and insurance issues. Also has Benefits Advisors available to help people with benefits disputes
No matter who you are, we can help. Contact us anytime, day or night, for information and support. Call us at 1-800-227-2345 or visit www.cancer.org.
References
US Department of Labor, Employee Benefits Security Administration. COBRA Continuation Coverage Assistance through ARRA. Accessed at www.dol.gov/ebsa/cobra.html on November 16, 2010.
US Department of Labor, Employee Benefits Security Administration. An Employee's Guide to Health Benefits Under COBRA. The Consolidated Omnibus Budget Reconciliation Act of 1986. September 2006. Accessed at www.dol.gov/ebsa/pdf/cobraemployee.pdf on November 16, 2010.
US Department of Labor, Employee Benefits Security Administration. Fact Sheet: COBRA Premium Reduction. Accessed at www.dol.gov/ebsa/newsroom/fsCOBRApremiumreduction.html on November 16, 2010.
US Department of Labor, Employee Benefits Security Administration. Continuation of Health Coverage -- COBRA. Accessed at www.dol.gov/dol/topic/health-plans/cobra.htm on November 16, 2010.
US Department of Labor, Employee Benefits Security Administration. FAQs About COBRA Continuation Health Coverage. Accessed at www.dol.gov/ebsa/faqs/faq_compliance_cobra.html on November 16, 2010.
US Library of Congress, THOMAS. American Recovery and Reinvestment Act of 2009. Accessed at http://thomas.loc.gov/cgi-bin/bdquery/D?d111:3:./temp/~bdc98x::|/home/LegislativeData.php| on November 16, 2010.
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