COBRA (the Consolidated Omnibus Budget Reconciliation Act) is a federal law allowing an employee or an employee’s dependents to maintain group health insurance coverage through an employer’s health insurance plan, at the individual’s expense, for up to 18 months after the employee leaves the company.
COBRA health insurance coverage may be extended beyond 18 months in certain circumstances. You are not required to enroll in COBRA for any reason, but it is one option to get coverage for an intermediate time period.
Understanding COBRA health insurance
- COBRA health insurance rules typically apply when an employee loses coverage through loss of employment (except in cases of gross misconduct) or due to a reduction in work hours.
- COBRA health insurance benefits also extend to spouses or other dependents in case of divorce or the death of the employee. Children who are born to, adopted, or placed for adoption with the covered employee while he or she is on COBRA coverage are also entitled to coverage.
- The Health Coverage Tax Credit may apply to your COBRA coverage, as long as an employer or former employer did not pay 50 percent or more of the cost of your COBRA coverage.
- All companies that have averaged at least 20 full-time employees over the past calendar year must comply with COBRA regulations.
Qualifying Life Events for COBRA
Certain qualifying life events will trigger an individual or family to be eligible for COBRA. Some examples of qualifying events under COBRA are:
- Termination of employment (voluntary or involuntary)
- No longer working enough hours to meet former plan’s eligibility requirements
- Divorce or legal separation from a covered spouse
- Termination of covered spouse’s employment
- Death of a covered spouse or parent
- Covered spouse or parent becomes eligible for Medicare and leaves group coverage
- Loss of dependent child status under a covered parent’s plan
COBRA health insurance and Obamacare
Under Obamacare, COBRA health insurance beneficiaries have additional coverage options, even if they lose coverage under a group plan outside of the ACA’s nationwide Open Enrollment Period (OEP).
- Beneficiaries may have the option to enroll in COBRA health insurance if they want to maintain coverage under their current plan.
- The loss of employer-based coverage may trigger a Special Enrollment Period (SEP), allowing them to purchase an individual or family health insurance plan outside of the ACA’s nationwide open enrollment period – a plan that is guaranteed-renewable, except in special circumstances.
Changing health insurance after COBRA ends
- If you’ve lost your job, changed your job (or your 18-months of COBRA coverage have run out), you are able to apply for new coverage in the individual health insurance market under the Affordable Care Act, or Obamacare.
- The next annual open enrollment period — when anyone can add or change their health coverage – is currently scheduled to begin on November 1 of this year.
- Outside of open enrollment, under the Affordable Care Act you can generally only enroll in an Obamacare-compliant individual or family health insurance plan when you experience a qualifying life event.
- Qualifying events include the loss of employer-based health insurance or the loss of COBRA coverage after your COBRA term expires.
- Voluntarily ending COBRA coverage or losing COBRA coverage for not paying the monthly premium generally are not qualifying life events. Other qualifying life events include marriage and divorce, the birth or adoption of a child, or moving to a new coverage area, among other things.
- A qualifying life event will trigger a 60-day special enrollment period, starting from the date of your qualifying event. During that time, you are eligible to apply for government subsidies and enroll in a new Obamacare-compliant individual or family health plan.
When you apply for your new coverage, it’s a good idea to have some proof of your loss or change in health coverage, such as a letter of termination from your employer or a copy of your coverage termination letter from your prior health plan — just in case your new insurance company requires them for verification.
As long as you apply for new coverage within a 60-day special enrollment period, your application for new health coverage cannot be declined. Be aware that all Obamacare-compliant major medical health plans generally provide certain popular benefits with no out-of-pocket costs like:
- A wide variety of preventive medical care services
- Dietary counseling and screenings for weight management
- Tobacco and alcohol screenings, counseling and help quitting
- And recommended mental health and illness prevention tests and screenings
If you miss your 60-day special enrollment period, you may not be able to enroll in a major medical health plan until the next open enrollment period. If this happens, we encourage you to look at short-term health coverage as an alternative to gain some measure of protection until you are eligible to apply for major medical coverage again during the open enrollment period. Short-term coverage does not meet the requirements of Obamacare, so you may still be subject to a tax penalty, and it is possible you will be declined based on preexisting medical issues.
To help find the right health plan for you, get a health insurance quote with eHealth.