Thursday, June 28, 2007
Understanding COBRA Health Insurance
COBRA is the acronym for 'The Consolidated Omnibus Budget Reconciliation Act' set up in 1985 and this law states that the health insurance cover of an employee will continue for at least 18 months after termination of employment. There are some cases where the limit extends to as much as 29 to 36 months and most companies who have the group insurance scheme are subject to COBRA.
The beneficiaries of COBRA are those people who lose their jobs and because of this law will not simultaneously lose their health insurance cover also. It basically aims at helping them though a rough patch. A terminated employee can buy health insurance for his family if it was done so while he was employed and for himself and this will be at the group rate which is payable by the employer 100% every month with a 2% surcharge. All companies are aware of the rules that apply to their respective employees.
If an eligible employee gets the sack, is laid off or encounters any change in his employment status like reduction in working hours, death or divorce of the eligible employee then the COBRA comes into play. It continues as per schedule or until the employee has got another individual or group health plan.
By law, employers must inform former eligible employees that they have an option to buy health insurance through COBRA specifying the cost of the cover and the employee in turn has up to 2 months to accept this cover. COBRA extends the health insurance for 18 months so a terminated employee as well as other participants of COBRA dont have to worry about the benefits changing as the only change is that the person paying the monthly premium changes and family members who were covered remain so. The coverage changes only if the former employer changes its policies regarding health insurance plans that it offers to its employees.
COBRA is a temporary measure and it is designed as such. On expiry of the time limit one finds that if measures have not been taken to get employment or another health cover you may find yourself without cover at all. It is unpredictable and one should protect against a situation where a serious condition is found like cancer while under the cover of COBRA and this makes you an uninsurable person for other health plans as now you have a pre-existing condition.
