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What is COBRA Insurance?
COBRA stands for Consolidated Omnibus Budget Reconciliation Act. It is a U.S. federal law that allows employees and their families to continue their group life insurance plans for a limited amount of time after they lose their jobs or experience other qualifying events, typically resulting in the loss of coverage.
Under COBRA, every eligible individual has the right to maintain the same health insurance coverage they had while employed. Still, they are required to pay the whole premium for the coverage themselves. This means that the employer will no longer be able to cover any portion of the insurance premium, and the individual will be responsible for the whole cost of coverage.
How Does COBRA Insurance Work?
Below is how COBRA insurance works:
Qualifying Event: A coverage becomes a qualifying event when a qualifying event occurs. This includes the following:
- Employment being Terminated
- Deduction to working hours due to loss of health insurance eligibility
- Divorced from the covered employee
- Death of the covered employee
- The covered employee becomes eligible for Medicare
Notice Period: When a qualifying event occurs, the employer must provide the individual with a notice period explaining their rights to COBRA and the measures they need to take to accept COBRA coverage.
Premiums: Employees who opt for COBRA coverage will be solely responsible for paying the total compensation. This includes every portion of the premium that the employer covers with the employee’s share.
Coverage Duration: The duration of coverage depends on the following events:
- In case of termination of employment, the COBRA coverage can last up to 18 months.
- For divorce-like qualifying events, COBRA coverage can last up to 36 months.
- For disabled individuals, their eligibility extends for 11 months, totalling up to 29 months of coverage.
How Much is COBRA Insurance?
Under COBRA, you are labelled to continue the same health insurance coverage that you had with your employer for up to 18 or 36 months. However, you will be responsible for paying the total premium for that coverage, which includes both a share of the compensation and the portion that your employer was previously paying on your behalf.
On average, COBRA coverage costs between $400 and $600 per month for an individual and between $1,000 and $1,800 per month for a family. However, costs can vary based on the specific plan and location.
Also, See: Cobra Continuation Coverage
