How to get COBRA health insurance if you lose your job or retire early
- COBRA insurance is a form of health insurance coverage provided by a company to a former employee.
- COBRA insurance is helpful for people in between jobs or in early retirement, as it allows them to take advantage of group insurance rates for up to 36 months after leaving a job.
- However, the individual is often responsible for both the employer's and employee's portions of the monthly premium under COBRA, which can drive up costs.
- An individual usually has 60 days to elect to receive coverage under COBRA after leaving the company.
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More than 158 million Americans get health insurance through their employer. If you unexpectedly lose your job at any point, or decide to retire early, you may get to hang on to that benefit through COBRA insurance.
Named for the Consolidated Omnibus Budget Reconciliation Act of 1985, COBRA allows a person to continue receiving the exact same health coverage they've been getting from their employer after they leave the company, as long as they're not covered by another plan elsewhere.
Here's how it works, according to the Department of Labor:
What is COBRA insurance?
COBRA covers most private sector and state or local government employers with 20 or more employees. If you recently left a full-time job where you were enrolled in health insurance, you can opt to continue coverage until you find a new plan or get a new job with coverage. Many states have laws similar to COBRA that cover companies with less than 20 employees.
Coverage can last between 18 and 36 months, depending on the nature of the "qualifying event," or the reason for leaving, and the rules outlined in the employer's healthcare plan.
Who qualifies for COBRA?
Any person who was enrolled in health coverage through their employer is eligible for COBRA insurance if there has been a "qualifying event," meaning they were either terminated from their position due to anything other than "gross misconduct" or they reduced their hours.
An individual usually has 60 days to elect to receive coverage under COBRA after leaving the company, so long as they are not covered by another plan.
If the employee's plan also covered their spouse or dependents while they worked at the company, they would be covered under COBRA as well. If the employee becomes eligible for Medicare, divorces the spouse, or dies, the spouse and dependents are still eligible for COBRA for at least 18 months, with the possibility of an extension.
How much does COBRA cost?
While COBRA enables a former employee to retain coverage at group insurance rates, the individual is often required to pay both the employer and the employee's portion, plus an administrative fee, driving up costs significantly. Some employers, however, may subsidize the cost of COBRA as part of a severance package for employees.
For those who suffered job loss due to economic reasons, a special tax credit may be available to help cover the cost of COBRA premiums.
Can I decide to stop COBRA insurance?
If you elect COBRA insurance and later decide it is too expensive or you want to pick a new plan on the Health Insurance Marketplace, you may only do so during the open enrollment period, which runs from November 1, 2019 to December 15, 2019, unless you qualify for a special enrollment period.
If your COBRA insurance is scheduled to end before the normal enrollment period begins, or your COBRA costs rise because of a change by your former employer, you will be able to choose a new plan during the special enrollment period (within 60 days before or after the qualifying event).