Human Resources and Employees Need to Know About COBRA Regulations

Unemployed People Must Decide Whether to Pay for COBRA

Unemployed woman reading COBRA letter in her home office.
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Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA) in 1986. It adds amendments to the Employee Retirement Income Security Act, the Internal Revenue Code, and the Public Health Service Act to provide continuation of group health coverage.

COBRA set forth regulations that give employees who lose their health benefits because of unemployment, the right to choose to continue group health benefits provided by their group health plan. These extended health care benefits are also extended to the families of those who lost their jobs.

These health care benefits may be extended for limited periods of time under certain circumstances, according to the COBRA regulations.

The COBRA regulations state that circumstances such as voluntary or involuntary or job loss reduction in the number of hours an employee works, transition and life events such as death, divorce, and unemployment may make individuals eligible for continuing their healthcare benefits after termination.

Qualified individuals may be required by the employer to pay the entire health insurance premium for health care coverage up to 102 percent of the cost to the plan.

COBRA Regulations

COBRA regulations state that the health insurance plan used by an employer, with 20 or more employees in the prior year, must provide for continuing coverage through the COBRA option.​

Employers must notify health plan administrators within 30 days after an employee becomes eligible. Plan participants and beneficiaries generally are sent a COBRA election notice within 14 days of the plan's notification. If it has been more than two weeks since your termination and you haven't heard anything, please call your HR department. An individual has 60 days to decide whether to elect COBRA continuation health coverage and 45 days after electing coverage to pay the initial premium. 

Deciding If You Should Use Cobra

When you leave a job (whether voluntarily or involuntarily) and don't have a new job that provides health insurance, you may questions if you should you sign up for COBRA. Of course, you need some kind of health insurance, but COBRA may or may not be your best option.

Under the Affordable Care Act (ACA), you can apply for health insurance through the Federal or state health insurance exchanges within 60 days of your health care coverage ending. You also have 60 days to decide about accepting COBRA coverage. It's important to note that 2017 was a turbulent year for the Affordable Care Act. Legislative battles in Congress, fluctuating support from healthcare stakeholders, and threats of repeal have left many payers facing an uncertain future.

Even though Congress has not yet succeeded in scrapping the law, the ACA’s opponents will likely continue to use all of their available powers to weaken the bill throughout 2018 and beyond. Payers should expect the changes in the ACA to impact premium rates and add challenges to the individual health plan market, so you need to keep an eye on this.

Meanwhile, you can compare the costs and benefits of each plan. If you are currently undergoing treatments, it may be in your best interest to go with COBRA so you don't have to change doctors or treatment plans. Although, if you're unhappy, now is the time to change.

Regardless of which choice you make, you're pretty much stuck with that until the next open enrollment period, or COBRA comes to an end. Of course, if you have a qualifying life event, like marrying someone with health care coverage who can add you to their plan, you can change at that time. Whatever you decide, it's something you'll have to deal with until you get a new job with health coverage.

Make a careful comparison of the costs. You might balk at the monthly cost of COBRA versus the ACA plan, but check things like deductibles and figure out what is best for you and your family.

If you've just been laid off or fired, you might be so panicked about your job loss that you can't take the time to think about your health insurance. Don't make that mistake. The last thing you want to happen is to end up without any health coverage at all, which can happen if you don't make up your mind within the 60 day time period.

Don't panic if you get the flu or break a leg. COBRA is retroactive back to the last day of company coverage, as long as you sign up and pay your premiums within the allowed 60 day period.