COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) allows workers and their dependents to purchase group coverage for 18 months (or sometimes longer) when the worker is voluntarily or involuntarily terminated. Workers who elect this coverage can pay up to 102% of the premium that the employer pays for coverage. The employer has 44 days to notify the terminated employee of his or her COBRA rights and the employee has 60 days to respond. To avoid COBRA confusion individuals should be aware of the following key points:
- Although the former employee has 45 days to make the initial payment, they must pay back to the date the coverage ended. Therefore, if their coverage ends on February 28th, they receive their COBRA letter on March 5 and elect the COBRA on April 30th; they must pay for March, April and May.
- Even though the former employee does not have health insurance during the COBRA election period he can purchase COBRA for all or one family member if there is a medical emergency.
- A former worker can accept COBRA for a family member with health problems even if he does not accept it for himself.
- Normally the former employee can purchase dental COBRA for 18 months even if they decline the Medical.
- Former workers are not required to stay on COBRA for 18 months.
- Instead of accepting COBRA you may be eligible for a Marketplace Plan with a government subsidy to help you pay for your health insurance.
- Finally, since COBRA is not recognized as credible coverage by Medicare, it is unlikely that this is your best option if you or your spouse are Medicare eligible unless you expect to get a job with health benefits very soon.