A Basic Overview of COBRA Health insurance
If you've ever become unemployed or self-employed after leaving a job with health benefits, chances are you received a letter in your exit package that mentioned COBRA. COBRA, which stands for "Consolidated Omnibus Reconsolidation Act," was signed into law by former President Ronald Reagan. Part of the law provided continuation health insurance coverage in the event that you become unemployed.
The great benefit of COBRA is that you're guaranteed coverage at the level afforded to your employer's group plan, and at the same premium (plus a maximum of 2% for administrative costs). COBRA offers you, as a former employee who received health benefits, additional coverage for 18-36 months after you lose or leave your job, regardless of your conditions or the type of coverage that your previous employer provided you.
Unfortunately, because of rapidly rising health insurance costs, most COBRA plans are out of the budget range of many families and individuals. COBRA often has a high premium because your employer is the primary contributor to your health plan. Under COBRA, you are required to cover your employer's contribution to your health plan. A Kaiser Family Foundation study found that employers contribute as much as 84% of individual health insurance costs, so the premium could become much too costly for the typical wage-earning family who is faced with the COBRA option.
The Good News: Affordable Health Insurance Alternatives are Available
Fortunately, you have a very good chance of finding coverage that is both affordable and also more aptly suited to you - without the added expense of COBRA health insurance. Some of the common plans that offer an alternative to COBRA include health management organizations (HMOs), preferred provider organizations (PPOs), exclusive provider organizations (EPOs), high-deductible health plans (HDHPs), and health savings accounts (HSAs). The type of coverage you choose depends on your family size, your own individual needs, and your budget. If you're a young and healthy self-employed individual, then chances are good that you can find coverage that costs less than the COBRA coverage offered to your through your former employer.
Qualifying Events for COBRA Continuation Coverage
If, after reviewing all of your alternatives to COBRA, you still decide that COBRA is your best option, here are the circumstances for which you qualify and their respective periods of coverage.
Divorce (36 months of continuation coverage)
Resignation, Layoff, or Unemployment for anything other than "gross misconduct" (18 months)
Reduction in Hours of Employment (18 months)
Death of the Employee (continuation coverage for the family for 36 months)
Employee becomes Qualified for Medicare (36 months after the employee qualifies for Medicare)
Loss of "dependant" Status for Children (up to 36 months)