If you had health care benefits through your previous employer and are now out of work because of a qualifying event, including if you quit your job, you're eligible for continuing coverage benefits through COBRA, the Consolidated Omnibus Budget Reconciliation Act. COBRA establishes the right for employees to keep their coverage for a limited time after their employment ends. Since it takes some people several months to find another job after losing one, COBRA provides a lifeline for the unemployed who lost their jobs through no fault of their own.
Cost of COBRA to Former Employee
Unfortunately, COBRA continuation coverage for an unemployed person is more expensive than the premiums active employees pay for group health coverage, since employers typically pay part of the coverage costs for active employees. The unemployed don't benefit from employer contributions.
Qualifying for COBRA
COBRA requires that employers offer continuation coverage to those employees who were covered by the act as well as their spouses, former spouses and dependent children, assuming that group health coverage is lost due to events specified in the act.
What's more, the Consolidated Omnibus Budget Reconciliation Act generally applies to companies that offer health insurance, such as the group health plans of private-sector employers with 20 or more employees. Likewise, COBRA applies to state or local governments with an equal number of employees.
COBRA, however, does not apply to those health plans that churches or the federal government sponsor. You might check with those organizations to see what coverage they make available to former employees.
State Laws Regarding Continuation of Coverage
Some state laws establish the right for employees to keep their health insurance coverage for a limited time after their employment ends. Your state's insurance commissioner's office can provide you additional information regarding insurance coverage continuation.
Three Rules Governing COBRA Qualification
You are entitled to continuation coverage under COBRA if your personal situation adheres to three criteria: COBRA covers your group health plan, a qualifying event occurs and you are a qualified beneficiary for that event
COBRA Coverage of Health Plan
According to the U.S. Department of Labor, COBRA covers private-sector employer and state or local government-sponsored group health plans, assuming those organizations employed at least 20 employees for more than 50 percent of their typical business days in the previous calendar year. Both full- and part-time employees are included in this calculation.
Occurrence of Qualifying Event
A qualifying event is one that leads to an individual's loss of group health coverage. The qualifying event itself determines which former employees are qualified beneficiaries for that event and the time during which a plan must offer continuation coverage.
Qualifying events for the employee include the termination of the employee's employment for a reason other than gross misconduct or a reduction in the number of hours the employee works.
Qualifying events for a spouse or dependent child of a covered employee include the two events described above and the eligibility of the covered employee to Medicare, the divorce or legal separation of the covered employee from a spouse and the covered employee's death.
Employee Is Qualified Beneficiary
A COBRA-qualified beneficiary is an employee who is enrolled in a group health plan on the day preceding a qualifying event that led to the employee's loss of coverage. Alternatively, the qualified beneficiary is the employee's spouse, former spouse or dependent child.
Also, in the event of the bankruptcy of a health-plan sponsoring employer, a retired employee, the employee's spouse and dependent children may be qualified beneficiaries. Others who are authorized to participate in the group health plan might be qualified beneficiaries as well.
COBRA, or the Consolidated Omnibus Budget Reconciliation Act, requires group health plans to continue to provide, on a temporary basis, group health coverage that otherwise might not be available to former employees. To qualify for the coverage, the former employee's status must meet three criteria: COBRA covers your group health plan, a qualifying event occurs and you are a qualified beneficiary for that event.